Struggling over risk. Solidarity and responsibility in the Eurosystem

Risk sharing practices within the Eurosystem raise the architectural question of the appropriate degree of solidarity and responsibility among the central banks participating in the system. In the euro area, the implementation of monetary policy is typically decentralized. Whereas this is of little significance when the losses of individual NCBs are shared by the Eurosystem as a whole, when individual NCBs remain responsible for the losses they incur, the credibility of euro area monetary policy and, in extreme scenarios, even the survival of the euro area as a whole may be endangered. This article surveys the constitutional rules applicable to risk sharing and maps the diverse landscape of risk distribution in monetary policymaking within the Eurosystem. The article claims that the central pillar of risk policy in the euro area – a default rule in favour of loss sharing among NCBs – violates both the letter and spirit of the ESCB Statute as written and shows how this gives rise to significant distributive struggles within the Eurosystem. The conclusion provided is that a decentralized implementation of monetary policy constitutes a significant source of fragility for the euro area.