What’s the ECB?

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The European Central Bank (ECB) was founded in 1998 to maintain price stability in the Eurozone. Its main goal is to create and maintain price stability, achieved through a low inflation rate and high employment. The ECB has many tools at hand, including the ability to issue bank notes and work with other European banking organizations. The Governing Council makes decisions, and the ECB has faced controversy over its policies.

The European Central Bank is the main banking group in charge of the monetary policy of the European Currency Unit or euro. Founded in 1998, the European Central Bank has many functions, but it is primarily responsible for maintaining price stability in the currencies of member countries. As of 2010, the European Central Bank has 16 member countries that are confident in its policies.

Now one of the leading banking systems in the modern world, the ECB grew out of earlier institutions such as the European Money Institute and the former Fund for European Monetary Cooperation. The ECB was the result of the Masstricht Treaty, also called the Treaty of the European Union, which paved the way for the creation of the European Union and the implementation of a single currency for member countries. The area governed by ECB policies is collectively known as the Eurozone.

Unlike other central banks that have the same set of tasks, the European Central Bank specifically specifies one purpose that must be held above all others: the creation and maintenance of price stability. The means to achieve this goal are varied, but are marked by a low inflation rate and a high level of employment. Other important tasks of the ECB include exchange rate policy, reserve management for member countries, the creation and implementation of monetary policy, and supervision of payment systems.

The European Central Bank has many tools at hand to help meet its main goals. It is the only organization that can issue bank notes, just like the Federal Reserve in the United States. In addition, it can work closely with other European banking organizations in member and non-member states, in order to boost regional stability and streamline cross-country operations. It also has a large section dedicated to the collection and analysis of financial statistics that can help influence and guide policy.

Decisions are made through the Governing Council, which has six executive members and the central bank governors of each member country. Executive members include a president, vice president, and four other members. Traditionally, the composition of the executive board is as international as possible to avoid a perception of favouritism. The entire board meets in Frankfurt, Germany twice a month to discuss policy and review financial development.

The ECB is not without controversy. When widely varied states are governed with contentious histories, it is difficult, if not impossible, to please everyone. Discussion of ECB policies is a common political issue in member and non-member countries. Support for the organization is mixed, with some believing it has done important work in stabilizing Europe’s currency and monetary policy, while detractors continue to favor nationalist politics.

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