What explains the crisis response of central banks? The case of central banking is seldom used in the broader field of public innovation and crisis management studies. This paper examines the crisis management of the European Central Bank and the Federal Reserve through two severe crises, to draw out insights about innovation processes that occur in the public sector. Drawing on contributions from crisis management, innovation, and organizational studies, this article proposes a new concept, "reluctant innovation," to capture the meso-level dynamics that occur in and around crisis-managing organizations. At the macro level, a severe crisis creates an impetus for action, and within central banks at the more micro- level competing ideas about best policy solutions will influence policy outcomes. Yet the often-neglected meso-level, where the organization navigates its legal, political, and administrative context, will also impact both the content and the timing of policy innovation. Using public documents, media reports, and existing accounts of these two crises, I demonstrate how in both the Fed and the ECB case, there were instances in which interactions with and contestation around the legal, political, and administrative context had profound impacts on the crisis response and policy innovation of these central banks.

The European Central Bank played a key role in the financial and euro crises, as well as in the management of the economic fallout from the COVID-19 pandemic. The central bank's actions continue to be debated with the 2022 inflation problems and the energy crisis. The Bank has been criticised by some for doing "too little, too late", and by others for acting unlawfully or unjustly when it did act. The argument put forward in this chapter is that the euro crisis was a differentiating shock for the Eurozone, which gave rise to dominance effects. Examining the ECB's actions through the euro crisis and the pandemic, we argue that existing institutional biases, rooted in an idiosyncratic blend of functional, geographical, and hierarchical differentiation, opened the way to dominance when managing these crises. This dominance took the form of arbitrariness, exclusion (some Member States received help, not others) and illicit hierarchy. The more brutal effects of the illicit hierarchical power which the ECB exercised as an agent of austerity during the euro crisis are seemingly gone. Yet, Europe has no guarantee that this sort of behaviour cannot return. This is so because the ECB's policies are characterised – and increasingly so – by discretion, not rules. Its policies are arbitrary and hierarchical in the sense that Member States do not know if or when the ECB will act as a lender of last resort for them.

How should history judge the euro crisis and the way it was handled? Does it qualify as a policy fiasco in the sense that it was avoidable? Or could the crisis at least have been handled in a manner which substantially reduced its destructive impact on the economic and social welfare and politics of Europe? These questions necessitate counter-factual analysis. Nevertheless, they deserve attention. How history is interpreted impacts decisions about today and tomorrow. The article explores three discourses on economic governance: on financial stability, fiscal policy and on growth. Each discourse came with pathologies: they did not sensitize decision-makers to crucial negative consequences of the policy choices they privileged at decisive points in the sequence of boom, bust and (policy engineered) painfully slow recovery. The ECB has quietly changed its ways, but unwillingness to confront the crisis head-on as a policy fiasco can obstruct learning opportunities that are important for the EU and the Eurozone going forward.

When the 2007 global financial crisis hit financial markets, European leaders were quick to point the finger at US markets, excessive risk-taking, and insufficient regulation. However, it soon became apparent that European banks were more exposed than their Wall Street counterparts. With massive dollar liabilities, European banks were dependent on the US to act as a global lender of last resort. The crisis revealed a level of transatlantic interdependence that had been unknown to most observers and policymakers prior to the crisis. We argue that this represents a paradox, given that the project of the European Monetary Union was partly motivated by a desire to make Europe more independent from the US dollar. The euro was a response to the challenge of ???it???s our dollar, but it???s your problem.??? In this article, we examine how the European vulnerability to the US dollar that began post-Bretton Woods did not, in fact, disappear with the creation of a European currency. Instead, through financialization and deregulation, European financial markets developed new, complex interactions with US financial markets. This financialization of transatlantic banking flows created a new type of interdependence. As European banks were so heavily invested in US markets, this gave the US authorities a direct interest in bailing them out. While cross-border banking flows have decreased since the crisis, the interdependencies remain, and currency swaps were used once again to handle the economic fallout from Covid-19. In the area of financial and monetary policy, the transatlantic relationship remains strong and stable within a dollar hegemony.

Den globale pandemien kjem til å få store økonomiske konsekvensar for mange land, i lang tid framover. Dei fleste land vil måtte ta opp meir statsgjeld, og for somme vil denne gjelda kome på toppen av eksisterande, tunge gjeldsbyrder. Verdas samla gjeld har auka dramatisk i tiåret sidan den globale finanskrisa i 2008, og statsgjelda til utviklingsland har dobla seg på eit tiår. Allereie hausten 2019 åtvara IMF og Verdsbanken om at verda stod ovanfor den verste statsgjeldskrisa på tretti år. Ei rekkje land stod allereie då på nippet til å hamne i gjeldskrise. Så kom korona. Dei direkte helserelaterte tiltaka er kostbare for statar, men det er også dei mange tiltaka som må iversetjast mot den alvorlege økonomiske krisa som virusutbrotet har skapa.

Scandinavian countries are known for their universalistic welfare states, corporatist coordination, strong economic performances and egalitarian outcomes, an institutional combination often referred to as the 'Nordic model'. However, these countries also possess volatile and increasingly vulnerable housing markets characterised by periods of sharp increases in prices and rents and some of the highest debt to income ratios in the world. The combination of a universalistic welfare state and housing market dynamics sets off a self-reinforcing process of increased stratification and re-familialisation. How did these orderly, egalitarian and welfare-oriented societies end up with housing markets that expose their citizens to increasing risk while driving inequality? The key lies in the effect the Nordic welfare state has on financialised housing markets. Successful decommodification of human lives leads to generalised creditworthiness which stimulates asset price inflation and new wealth and risk inequalities.