Safeguarding Our Central Bank in an Age of Populism

Having spent my early career in treasury management within the financial services sector, before entering politics in Dáil Éireann, I have come to appreciate an uncomfortable truth about both worlds: they are bubbles.

In finance, as in politics, we can become consumed by technical detail, niche debates and news cycles that feel momentous to those inside the room.

Yet outside these circles, most people are understandably less absorbed by developments that we may treat as seismic, but which often register as distant or even dull to everyone else.

And, in fairness, they may be the wiser for it.

However, one issue that has increasingly stood out to me as a shared feature of both the financial and political world is one that has not received the attention it deserves, despite the damage it could inflict on the wider economy and society.

In recent months, and with particular intensity over the past week in the United States, we have seen a growing and overt assault on central bank independence.

This week’s attempt to weaponise the United States Department of Justice in order to pressure the chair of the Federal Reserve, Jerome Powell, marks a troubling escalation.

The logic behind such efforts is familiar. By bending central banks to political will, governments claim they can deliver stronger economic outcomes.

In reality, political interference prioritises short-term stimulus over long-term stability and erodes public trust. Central bank independence matters because economic and financial stability depend on rules being applied consistently rather than politically.

In Ireland, an independent regulator underpins confidence in the banking system and the wider economy by ensuring supervision is predictable, credible and insulated from short-term pressure. That stability is central to Ireland’s reputation as a reliable place to invest, lend and do business.

This attempt to subordinate the Federal Reserve is not an isolated case but part of a broader populist trend.

In the United Kingdom, Nigel Farage and Reform UK have attacked central banks for their role in bond markets, while Germany’s AfD accuses the ECB of fuelling inflation. Elsewhere, France’s National Rally, led by Jordan Bardella, argues the opposite by calling for greater intervention to ease the difficulties around French public debt.

Similar assaults on central banking independence are occurring continuously in India and Turkey.

Different prescriptions, but the same populist impulse to bend independent institutions to short term political ends.

The politicisation of central banks is a growing trend, one I fear Ireland is not completely immune to.

Let me be clear, Ireland is not facing a sustained or systemic assault on central bank independence. Monetary policy is insulated at euro area level through the European Central Bank, whose legal independence is embedded in EU treaties and well beyond the reach of domestic politics.

While monetary policy is insulated from domestic politics, the Central Bank of Ireland’s regulatory and supervisory functions are more exposed. These powers rest in ordinary statute rather than constitutional law.

As a result, members of the Oireachtas can, in principle, expand or narrow the bank’s mandate, create exceptions, or attach political conditions to specific functions and frameworks.

This does not pose an immediate threat, but it is a structural vulnerability that could be exploited under the right political circumstances. Just look at Trump’s America.

That vulnerability becomes more visible when issues carry a strong moral charge or offer short-term political gain. Last year’s debate around the Central Bank’s technical role in approving a bond prospectus for a foreign sovereign illustrated this clearly.

The bank was legally required to assess the prospectus against predetermined regulatory criteria, yet political pressure was applied and legislative intervention was proposed. The episode was ultimately resolved within the existing rules, but it demonstrated how quickly operational independence can be tested when regulatory decisions become politically charged.

I am not arguing that the Central Bank of Ireland should operate with complete autonomy over what it regulates or the frameworks and standards it applies. There will always be a political dimension to these decisions, and rightly so. The challenge is to strike the right balance.

It is appropriate that the objectives and tools of central banks are subject to democratic scrutiny and that central bankers are accountable to legislatures. Strong accountability is essential if central bank independence is to sit comfortably alongside democratic priorities such as climate resilience and economic justice.

In many ways, this scrutiny is what ultimately protects and justifies the legitimacy of that independence.

However, we also need to plan for the unfathomable. Recent political developments in the United States and across parts of the European Union show how quickly previously unthinkable political pressures can become real.

As legislators, we have a responsibility to anticipate threats to our democratic institutions and to respond before they materialise rather than after the damage is done. Ireland is not immune to the rise of populism, and it would be complacent to assume otherwise.

I believe that means giving serious consideration to safeguards that would protect the Central Bank of Ireland if it came under sustained political pressure. These include clearer statutory rules on non-interference between government, the Oireachtas and the Central Bank, stronger protections around changes to the bank’s mandate, and robust independence in the appointment process.

None of these measures would remove democratic oversight, but they would help ensure that oversight does not slide into direction or control.

In today’s political environment, space for careful and considered debate can feel increasingly limited, particularly when populist promises are offered as solutions to complex problems.

The more central banks are pulled into the political spotlight, the greater the risk that their day-to-day decision-making becomes subject to short-term pressure.

Central bank independence is an essential part of our democratic architecture. Protecting it is not about insulating technocrats from scrutiny, but about ensuring that short-term political pressures do not undermine long-term economic stability.

In an era of rising populism and institutional strain, that principle matters more than ever.

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