The Application of the Principle of Proportionality to Monetary Policy: an Impossible Task?

The European Court of Justice (ECJ) has held that the European Central Bank (ECB) enjoys considerable discretion in the formulation and implementation of monetary policy and that the application of the principle of proportionality should accommodate that discretion. This article reviews a large body of evidence to conclude that, in an uncertain and evolving economic environment, it is probably impossible for the ECB to conform with a strict interpretation of the principle of proportionality. Even conformity with the simpler interpretation of the ECJ is not fully explained in the seminal judgments in Gauweiler and Weiss. This incomplete explanation is especially true with respect to the weighing of divergent interests and exposes the ECB to future legal challenges.