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Is the European Central Bank (ECB) increasingly acting on political – rather than technocratic – considerations? This question is of a central concern to students of European Union (EU) political economy. This article contributes to this debate by studying the ECB’s credit lines to the central banks of EU member states outside the Euro Area during the Global Financial Crisis and the COVID-19 crisis. Both times the ECB accorded selectively better borrowing conditions to some central banks. The article finds that its selection of who gets favourable borrowing terms has indeed become more political. In 2008, the ECB decided the credit terms based on technocratic criteria, but twelve years later, it granted better lending conditions to countries that were close to adopting the euro. How the ECB balances its mandate for price stability in the Euro Area and its role as a supranational EU institution decides whether it will become more politicised.

Credit lines between central banks can be a powerful instrument to restore international financial stability during a crisis. Yet, so far, few political scientists have ventured to study central bank cooperation in the context of European macroeconomic governance and the implications for the international role of the euro. This paper closes this gap in our knowledge by looking at the European Central Bank’s (ECB) cooperation with non-Euro Area central banks during the Global Financial Crisis 2008/09 and the COVID-19-crisis 2020. Based on recently declassified policy documents and eight insider interviews I find that the ECB’s handling of the international role of the euro has changed over time. In 2008, the ECB had decided the credit terms largely based on perceived sovereign credit risk. In 2020, the ECB granted better lending conditions to countries that were institutionally closer to the Euro Area. Based on this I argue that the ECB has redefined its interests during international crises from limiting financial risks to promoting the institutional objectives of the Euro Area. This indicates not just that the ECB has in 2020 acted more proactively as international lender of last resort, but also that it has done so largely in line with political considerations.

Credit lines between central banks can be a powerful instrument to restore international financial stability during a crisis. Yet, so far, few political scientists have ventured to study central bank cooperation in the context of European macroeconomic governance and the implications for the international role of the euro. This paper closes this gap in our knowledge by looking at the European Central Bank’s (ECB) cooperation with non-Euro Area central banks during the Global Financial Crisis 2008/09 and the COVID-19-crisis 2020. Based on recently declassified policy documents and eight insider interviews I find that the ECB’s handling of the international role of the euro has changed over time. In 2008, the ECB had decided the credit terms largely based on perceived sovereign credit risk. In 2020, the ECB granted better lending conditions to countries that were institutionally closer to the Euro Area. Based on this I argue that the ECB has redefined its interests during international crises from limiting financial risks to promoting the institutional objectives of the Euro Area. This indicates not just that the ECB has in 2020 acted more proactively as international lender of last resort, but also that it has done so largely in line with political considerations.

Since the introduction of the euro in January 1999, exchange rate stability at the periphery of the euro area is growing. The paper investigates the impact of exchange rate stability on growth for a sample of 41 mostly small open economies at the EMU periphery. It identifies international trade, international capital flows and macroeconomic stability as important transmission channels from exchange rate stability to more growth. It is argued that fixed exchange rates provide a more stable framework for the adjustment of asset and labour markets of countries in the economic catchup process thereby accelerating growth. Panel estimations reveal a robust negative relationship between exchange rate volatility and growth for countries in the economic catch-up process with open capital accounts.

Before and after the Asian crisis, the dollar has been the dominant anchor and reserve currency in East Asia. Due to underdeveloped capital markets and a very limited international role of the domestic currencies, the East Asian countries (except Japan) are likely to continue exchange rate stabilization and accumulation of international reserves. Yet expectations about a further depreciation of the dollar may trigger a broader orientation of exchange rate policies based on basket strategies. While the direction of trade suggests a substantial weight for the Japanese yen in East Asian countries' currency baskets, the role of the euro is enhanced by expectations about its long-term stability. (Rolling) econometric estimations of the basket structures in East Asia suggest growing weights of the euro and the yen in the currency baskets of Indonesia, Korea, Philippines, Singapore, Taiwan and Thailand. In contrast, for China, Hong Kong and Malaysia, the dollar remains the dominant anchor currency.