Disorder and Discipline: The ECB's Transmission Protection Instrument

Abstract

(Series Information) European Papers - A Journal on Law and Integration, 2022 7(2), 739-748 | European Forum Insight of 9 November 2022 | (Table of Contents) I. Introduction. - II. EMU and market discipline. - III. How the markets would behave. - IV. How the markets should behave. - V. Protect and Discipline. - VI. Conclusion. | (Abstract) In the asymmetric Economic and Monetary Union "market discipline" has played an important and controversial role to compensate for the weakness of the legal framework as regards fiscal affairs. Both as an empirical matter of market behaviour and as a matter of the "no bail-out" clauses of arts 123 and 125 TFEU being effectively undermined after the crisis, however, "market discipline" has never worked as advertised. Instead, the Court of Justice has offered a contrived "synthesised" ver-sion of the "logic of the market" as a marker of the legality of financial assistance by the European Stability Mechanism and of the European Central Bank bond purchasing programs. The recent Transmission Protection Instrument announced by the Bank should be seen, so it is argued here, as an attempt not just to facilitate the normalisation of monetary policy, but to bring the relationship between economic law and governance, on the one hand, and market discipline, on the other, back to normal.

Keywords

• economic and monetary union
• european central bank
• transmission protection instrument
• economic governance
• sovereign debt
• conditionality