Why Europe must rethink central bank independence

The author contends that while central bank independence must be protected from populist right-wing capture—citing attempts by Donald Trump in the US and leaders in Turkey and India—the current technocratic orthodoxy is failing. The text argues that the ECB's focus on price stability via interest rate hikes has been ineffective against 'cost-push' inflation and 'greedflation', and has actively hindered the green transition by increasing capital costs for renewables. To remedy this, the document proposes a 'whole-of-government approach' involving a coordination council and the definition of time-bound secondary objectives, such as 'green interest rate' policies, to align monetary policy with democratic goals without requiring treaty changes.

• Populist right-wing movements globally are attempting to capture central banks for partisan purposes, such as Donald Trump's efforts to influence the US Federal Reserve to finance tax breaks and manufacture short-term growth, and actions by leaders in Turkey and India to override central bank decisions.
• The traditional central banking focus on inflation-targeting has proven ineffective against inflation caused by 'cost-push' factors (like fossil fuel prices) and 'greedflation' (corporate profit expansion), as rate hikes cannot break the latter because firms pass financing costs to consumers.
• ECB interest rate increases have a direct negative impact on renewable energy deployment; specifically, a 0.25 per cent rate hike is associated with an 8 per cent reduction in new offshore wind installations and a 26.5 per cent reduction in solar photovoltaic installations.
• Climate change is expected to create future price instability, with ECB researchers estimating that by 2035, headline inflation could increase by 0.3-1.2 per cent and food prices by 0.9-3.2 per cent annually, depending on global warming levels.
• To align monetary policy with democratic goals, the author proposes creating a coordination council involving finance ministries, the ECB, and EU institutions to define time-bound secondary objectives and implement 'green interest rate' policies.

APA

Jourdan, S. M. S. (2025). Why Europe must rethink central bank independence. Green European Journal. https://www.greeneuropeanjournal.eu/why-europe-must-rethink-central-bank-independence/

Chicago

Jourdan, Sebastian Mang, Stanislas. Why Europe must rethink central bank independence. Green European Journal, 2025. https://www.greeneuropeanjournal.eu/why-europe-must-rethink-central-bank-independence/.

Wikipedia

{{cite press release |last1=Jourdan |first1=Sebastian Mang, Stanislas |title=Why Europe must rethink central bank independence |publisher=Green European Journal |date=4 December 2025 |url=https://www.greeneuropeanjournal.eu/why-europe-must-rethink-central-bank-independence/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{jourdan2025why, author = {Jourdan, Sebastian Mang, Stanislas}, title = {{Why Europe must rethink central bank independence}}, publisher = {Green European Journal}, year = {2025}, month = dec, url = {https://www.greeneuropeanjournal.eu/why-europe-must-rethink-central-bank-independence/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }