Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
It's not the ECB's job to steer the economy or take political decisions that should be taken by the EC and the Eurogroup, but Ashoka Mody has a pretty full bill of criticisms of the ECB's performance as a central bank (with the powers it has) on Pieria:

The ECB's balance sheet, if needed

A central bank can undertake two principal actions: actively stimulate the economy and passively promote lending (see Hetzel, 2012, especially chapters 14 and 16 for the theory and application to the Great Recession in the United States). Active monetary stimulus of the economy is normally achieved by reducing its policy interest rate. The market's expectation of how long the policy rate will remain low determines the extent of the decline in long-term interest rates and the consequent increase in investment. When the policy rate falls to zero, the central bank can buy financial assets to directly lower the long-term interest rate, an action often described as "quantitative easing."

In contrast to active monetary stimulus, the central bank can passively provide funds to banks in the hope they will lend more to release credit constraints on economic growth. However, there is no guarantee that the banks will use their easier access to funds for new lending.  

By these conventional categories, the ECB provided no active stimulus. Policy interest rate reductions always lagged behind the fall in activity; indeed, interest rates were raised in 2008 and, more disastrously, in 2011 (Hetzel, 2014). And, the ECB has been virtually absent in the purchase of assets to directly influence long-term rates.  

The ECB did provide banks with additional "liquidity." But, in doing so, it acted in a manner highly unusual for central banks. For an extended period, the ECB's so-called liquidity operations have, in effect, propped up insolvent banks and have thus been a giant exercise in forbearance.

Consider the evidence.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Dec 5th, 2014 at 11:38:04 AM EST
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The Fed, if not the ECB, also has full powers of regulation of banks, so, via prudential regulation and directives it could prevent the banks from using the freedom they get from QE to invest in stock and commodity markets. They don't do this because their function, especially the New York Fed and the Board of Governors in D.C., is to serve the financial sector by providing a screen of 'independence' and because they place the interests of the financial sector at least an order of magnitude above the interests of the broader economy. This has always been partly baked in the cake, but, with capture of government via financial sector campaign contributions, it has been locked down. As far as I can tell, the ECB does not even have a small fraction of the actual authority that the Fed has over the financial sector.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 8th, 2014 at 12:38:49 AM EST
[ Parent ]


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