On June 9, 2025, Frank Elderson, a member of the Executive Board of the European Central Bank (ECB) and Vice-Chair of its Supervisory Board, addressed the Italian Constitutional Court, emphasizing the essential role of the rule of law as a constitutional pillar supporting European central banking.

In his keynote speech, Elderson discussed the relationship between the rule of law and economic prosperity, arguing that its presence is critical for both the efficacy of central banks and the stability of financial systems.

Elderson's remarks drew attention to the multiplicity of ways in which the rule of law underpins central banking activities.

He noted that while the rule of law has long been recognized as vital in legal contexts, its importance to economic growth and stability is becoming increasingly acknowledged.

Citing recent research by economists who were awarded the Nobel Prize in Economics, Elderson highlighted a causal relationship between weak legal institutions and diminished economic growth.

Strong institutions foster a stable environment for investment and innovation, creating a positive feedback loop between economic vitality and institutional strength.

Central banks, as Elderson pointed out, play a crucial role in maintaining this loop.

They are more effective in achieving their mandates — particularly in maintaining price stability — when operated within a robust legal framework.

The rule of law facilitates predictability and transparency, allowing central banks to assess economic conditions accurately and implement appropriate monetary policies.

The ECB's operational independence is closely tied to the rule of law, with Elderson outlining how legal frameworks enable central banks to perform without short-term political pressures.

This independence is critical not only for maintaining price stability but also for ensuring the credibility and social trust in central banking institutions.

He noted that the European System of Central Banks (ESCB) integrates national and European central banks, necessitating a commitment to legal standards across jurisdictions to maintain effective functioning.

Elderson also discussed the evolving nature of money in the digital age, stressing that the trust underpinning currency is derived from legal systems.

He highlighted the ECB's efforts to potentially issue a digital euro, which would be grounded in a strong legal foundation to maintain trust amidst technological advancements.

Throughout his address, Elderson reiterated that the ECB must not only operate within the bounds of the law but also actively promote adherence to rule of law principles within the broader context of its operations.

As he concluded, the ECB’s actions are subject to scrutiny by the Court of Justice of the European Union, underscoring its commitment to legal accountability.

In light of the complex interdependencies between central banking, legal integrity, and economic health, Elderson's speech articulated a vision in which the rule of law is not merely a legal concept but a fundamental requisite for ensuring the stability and effectiveness of central banking in Europe.