The Changing Nature of the Crisis and the Revival of the Lender of Last Resort

The decisions taken during the crisis (and the circumstances that caused them) have reopened the debate on the role of central banks, their objectives, and the adequacy of monetary policy strategies. As is well known, the ECB has been granted exclusive jurisdiction to conduct the monetary policy of the euro area. However, rather than the view of the ECB as being tortured by its own statutes, the European Central Bank has exercised its crucial role as a lender of last resort to support the banking and public sectors, with the ultimate goal of safeguarding the stability of the euro area. In reviewing these issues in the light of the major changes, which have affected the economic and financial environment, we shall attempt a thorough analysis of the principles guiding European monetary authorities in their response to the financial emergency. The aim of this chapter is to prove that a similar evolution, not exclusive to national “central banking”, represents the natural outcome of the instrumental framework with which the ECB has been endowed, in order to carry out its tasks effectively.