[6] The underpinning arguments resulted in the principle of central bank independence being enshrined in primary legislation, thereby establishing a link between monetary policy and the citizens of the European Union. Let me finally add that there is a euro area specific argument in support of central bank independence which makes the euro area special within the group of advanced economies. The euro area is not a nation state. Its institutional framework is shaped by the fact that a single European monetary policy co-exists with national or shared sovereignty in various policy domains. Fiscal and labour market policies are particularly relevant in this regard. This raises complex political economy questions, not foreseen in the earlier literature, about how the interests of supranational policies and non-harmonised national policies can be aligned. In such an environment, it is important to have an independent institution which provides the various national decision-makers within the monetary union with a stable nominal anchor enshrined in Union primary law. [7] From a legal perspective, the Treaty on the Functioning of the European Union established the European System of Central Banks (ESCB), consisting of the ECB and the national central banks (NCBs) of all EU Member States, and assigned to the ESCB the primary objective of maintaining price stability.
However, independence does not mean isolation, which is why it is important for a dialogue between the central bank and the democratically elected institutions, as well as directly with the public at large, to be maintained. There is a third insight, which is related to the second. For independence to contribute to achieving a desired inflation target, it needs to be accompanied by a limited and clearly http://www.ecb.europa.eu/press/key/date/2017/html/sp170330.en.html[03.04.2017 15:53:14]  Central bank independence revisited  defined mandate for the central bank. As I will explain in a greater detail when talking about accountability, a clear and limited mandate is necessary for the parliament and the public to be able to monitor and evaluate the performance of the central bank. But, apart from that, a clear and limited mandate also reflects the insight, dating back to Tinbergen[5] , that institutions must not be overburdened with multiple goals without having the appropriate instruments to achieve them. These economic insights contributed to the rationale for providing the ECB with a high level of independence, in view of the primary objective assigned to the ECB of maintaining price stability. This rationale has also been recognised by the CJEU, according to which this independence is not an end in itself but serves to shield the decision-making process of the ECB from short-term political pressures in order to enable it effectively to pursue the aim of price stability.