COMMENTARYGermanCouncilonForeignRelationsThreeIdeastoImprovetheInternationalRoleoftheECBTheECBhasbeenforced–inpartbytheCOVID-19crisis–toreviewitsbi-lateralarrangementswithforeigncen-tralbanks.ButtherecentchangesmadebytheECBfallshortoftheEurope-anCommission’sambitionstoboosttheinternationalroleoftheeuro.WesuggesttheECBshouldputinplaceanalternativethree-pillarframe-worktoimprovetheinternationalroleoftheECBandcementitspivotalroleintheinternationalfinancialsystem.InanewpaperreleasedonJanuary19,theEuropeanCommission(EC)reit-erateditscommitmenttostrengthentheinternationalroleoftheeuro.Thisispartofalong-standingplanthathasbeenfollowedbylittleactionsofar.Al-thoughthereportisbroad,itdoesnotmentionactionstobetakenbytheECB–despitethefactthatitsroleasagloballenderoflastresortisbecom-ingevermoreimportanttotheinter-nationalfinancialsystem.SincetheeconomicshockoftheCOVID-19pandemic,theECBhasoverhauleditseuroliquidityprovisiontoforeignnon-eurocentralbanks.Theoverhaulhasinvolvedreviewingexist-ingarrangementsandextendingac-cesstoeuroswapandrepofacilitiestonon-euroareacentralbanks–therebyhelpingtheECBtostabilizepricesandmitigatefinancialstabilityrisksdo-mesticallyandabroad.Duringthe2008globalfinancialcri-sisanditsaftermath,theECBhadtomakehardchoicesaboutitsFXswappolicyandadoptedaveryconservativeline,preciselywhenitwasenjoyingthegeneroussupportoftheFederalRe-serve’sownUSdollarliquiditylines.Indeed,between2009and2011,theECBrefusedtoextendswaplinestoHungaryandPolandwhentheywereinafinancialcrisisandinneedofeuroliquidity,ortoLatviawhentheSwissNationalBankandtheSwedishRiks-bankrespectivelyrosetothechallengeofeffectivelyofferingsupportwhentheECBshouldhavealsobeentheretohelp.ThenewchangesintroducedbytheECBduetotheCOVID-19pandem-icdonotgofarenoughincreatingtheframeworktoprovideeuroliquiditytothosewhomayneedit.TheECB’sbi-laterallendingframework–viaswapsandrepos–continuestocreatedoublestandardsbetweenEUmemberstatesNo.04February2021DanielaGaborProfessorofEconomicsandMacro-Finance,UWEB...
