Abstract and Keywords
Government weakness and political fragmentation lie at the roots of the Bank’s importance in economic governance. The Bank maintained independence in appointments throughout the postwar period, acting as a breeding ground for civil servants and developing extensive technical expertise. Its independence increased after 1981, when it was freed from the obligation to buy unsold treasury bills. The Bank’s influence on policy was extensive: it was the main advocate of stable macroeconomic policies, exploiting European economic policy constraints to foster reform, and managing the exchange rate to fight inflation and promote industrial restructuring. With the third phase of Economic and Monetary Union, the Bank focused on promoting the consolidation of the banking system and modernizing it. However, the relative strengthening of domestic political institutions, the curtailing of the Bank’s independence in 2005, and the flow of powers to the European level have somewhat reduced the Bank’s functions.
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