Tensions are mounting inside the European Central Bank as employee representatives accuse president Christine Lagarde of undermining internal democratic safeguards, despite publicly championing the rule of law across Europe.

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In a letter seen by the Financial Times, the ECB’s staff committee said the institution is ignoring the very legal principles Lagarde has praised as one of the EU’s “critical comparative advantages”. They claim the bank’s governance is becoming increasingly opaque and centralised, with employee representation being sidelined.

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The letter, written by staff committee chair Carlos Bowles, describes the ECB as an “unaccountable legal fortress” and criticises proposed reforms that would force elected staff representatives to spend part of their time on regular job duties, rather than fully advocating for employee interests.

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While the ECB is headquartered in Frankfurt, it is not subject to German labour law due to its extraterritorial status. This means employee councils at the bank do not enjoy the same legal protections that are enshrined in national frameworks, such as full-time representation roles.

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Under German labour law, elected representatives on works councils typically devote their full time to staff advocacy without forfeiting pay or career prospects. The ECB’s push to reduce these protections is being met with resistance from its own employees, as well as from major unions in Europe.

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Bowles argues that the proposed shift would weaken the only institutional check on ECB leadership, making it harder for employees to raise concerns or influence policy internally. “The ECB is both an employer and a legislator,” he wrote, adding that this dual role creates an environment where dissenting voices are stifled.

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He also cited internal dissatisfaction, including widespread complaints of favouritism, burnout, and insecure contract conditions. An internal union survey earlier this year revealed that 77% of respondents believed internal advancement was driven by personal connections rather than merit. Only 19% thought the ECB was effective in promoting the most competent individuals.

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The ECB, for its part, has defended the proposals. In a statement, it said it remained “firmly committed to the rule of law” and noted that its employment framework is aligned with EU Staff Regulations and subject to European Court of Justice oversight. It also claimed to have won the “overwhelming majority” of relevant court cases brought before the ECJ.

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The central bank argues that the reforms are intended to help staff representatives maintain stronger connections to their roles and the institution’s broader mandate. The changes are expected to take effect by mid-2026.

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But critics argue the timing and substance of the reforms reflect a deeper cultural issue at the heart of the ECB’s internal operations. Both the European Public Service Union (EPSU) and Germany’s Verdi union have written to Lagarde urging her to abandon the proposals.

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The controversy shines a light on the ECB’s unique legal and political status. While it plays a powerful role in shaping monetary policy and financial regulation across the euro area, its internal governance structure allows it to operate outside the legal norms expected in its host country.

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As Bowles put it, the reforms risk “undermining and even silencing” the only formal counterbalance to the institution’s top leadership.

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With rising staff dissatisfaction and mounting public scrutiny, the ECB now faces pressure not just to steer inflation and growth, but also to address internal governance and transparency – starting with how it treats its own employees.

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