Latest 06.06.2008
European Central Bank to raise interest rates

The European Central Bank has just announced that it is considering raising interest rates at its next meeting. This raises further questions about the details of what is contained in the Lisbon Treaty.

High interest rates will have a more devastating effect in Ireland than elsewhere because Irish people carry a high level of debt due to a property bubble that was hyped up by the government and the banks.

Rising interest rates will therefore eat heavily into pay packets.

The Lisbon Treaty contains two features of a neo-liberal approach to central banking.

• It makes the ECB totally independent of any democratic influence. Article 245a states that:

'It shall be independent in the exercise of its powers and in the management of its finances. Union institutions, bodies, offices and agencies and the governments of the Member States shall respect that independence'.

This article helps to seal the ECB off from any democratic pressure from the people of Europe.

• Article 105 continues the practice of previous treaties by stating that 'the primary objective of the European System of Central Banks shall be price stability'.

The focus on fighting inflation to the neglect of promoting full employment or lower interest rates is one of the great canons of neo-liberal economics.

Formally, the ECB takes a more extreme position than even the Bank of Japan or the US Federal Reserve.

The former is mandated to maintain close contact with its government while the latter must promote 'maximum employment' and 'moderate interest rates' as well as 'price stability'.

In their latest press release, the ECB stated that one of the reasons for raising interest rates is that they feared pressure for higher wages from the unions.

They are less concerned that high interest rates might deepen an economic slowdown and lead to increased unemployment.

By voting No to the Lisbon Treaty we can indicate our opposition to the wider neo-liberal tenor of this treaty.