From Wikipedia, the free encyclopedia.
The European Central Bank (ECB) in Frankfurt am Main is the central bank of the European Union, in charge of monetary policy for the 12 countries that use the new euro currency.
The ECB is known by different initials in different languages:
- EZB: Europäische Zentralbank
- BCE: Banque Centrale Européenne, Banco Central Europeo, Banca Centrale Europea, Banco Central Europeu
- ECB: European Central Bank, Europæiske Centralbank, Europese Centrale Bank, Europeiska Centralbanken
- ΕΚΤ: Ευρωπαικη Κεντρικη Τραπεζα
- EKP: Euroopan Keskuspankki
The main goal of the BCE is to keep inflation stable. Currently (2002), the target was to keep inflation below 2% in the eurozone. For keeping prices stable, the BCE may cut or raise rates.
The ECB is governed by a board of directors, headed by a President, and a board of governors, consisting of the members of the board of directors and representatives of the other central banks in the ESCB.
The organization of the ECB is modelled on that of the German Bundesbank and Landsbanks.
The European System of Central Banks (ESCB) is comprised of the European Central Bank (ECB), and the national central banks of the fifteen member-states of the European Union. The term "Eurosystem" is used to designate the ECB and the central banks of the member-states that have adopted the euro.
The central banks of the member-states not participating in the Eurozone, while part of the ESCB, have a special status: they are entitled to conduct their own national monetary policies, but not to take part in deciding or implementing monetary policy of the eurozone.[1]
In accordance with the Treaty establishing the European Community and the Statute of the European System of Central Banks and of the European Central Bank , the principal objective of the Eurosystem is to maintain price stability. Without losing sight of this objective, the Eurosystem lends its support to the general economic policies of the Community and acts in accordance to the principals of an open market economy. [1]
The Eurosystem's primary objective is the maintenance of price stability. It meets its objectives through :
Source for this section: European Central Bank website, Frankfurt am Main,Germany. [1]
First, critics focus on the independence of the institution. The ECB was established as a central bank designed to operate independently of political intervention. Its objectives and powers were politically established, but the decisions as to how those powers should best be used to achieve the objectives was left in the hands of the ECB itself.
Some see this independence as undemocratic and therefore criticise the decision making process and objectives of the ECB, asserting that the economic goals of the ECB are hard-wired to be secretive and independent from most citizens of the European Union, and to be isolated from feedback mechanisms regarding the influence of the money economy on human rights violations or the natural environment.
The ECB does not publish or invite comments on its proposed decisions. After publication of its actions and decisions, ECB web pages do not solicit direct comments by citizens.
European citizens may influence the policy decisions of the ECB very indirectly via the formal, national democratic electoral process. However, even if changes in economic assumptions are expressed via formal democratic means, elected politicians have very little power to transmit these changes to the ECB.
Second, critics assert that the objectives given to and pursued by the ECB are inappropriate. The ECB sets interest rates with a view to controlling inflation, but does not take into account objectives such as employment and exchange rate stability. Some therefore view this as too narrow a set of objectives, leading to interest rate decisions that are inappropriate given the wider needs of the economy.Goals and instruments
European Central Bank: Organization
European System of Central Banks (ECSB)
The process of decision-making in the Eurosystem is centralised through the decision-making bodies of the ECB, namely the Governing Council and the Executive Board. As long certain member-states have not yet adopted the euro, there remains a third decision-making body, the General Council (current members of the decision-making bodies of the ECB).[1]Criticisms
There are two main lines of criticism against the ECB.
