Governing Sovereign Risk in the Euro Area: Law and politics of the ECB’s collateral and market stabilisation framework

This paper analyses the ECB’s treatment of sovereign debt in its collateral framework and market stabilisation instruments. The ECB’s treatment of sovereign debt sits at the core of Europe’s financial stability, yet its legal mandate leaves the central bank with wide discretion. This paper analyses the political stakes and design choices in the ECB’s sovereign debt policies and how the European Parliament can respond. The European Parliament can enhance the democratic legitimacy of the ECB’s approach to sovereign debt by demanding more transparency, ensuring presence in key fora shaping sovereign-debt governance, as well as by deepening its guidance on the secondary mandate. This document was provided by the Economic Governance and EMU Scrutiny Unit at the request of the Committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 3 December 2025.