Central Bank

The arrival of Monetary Union in Europe has brought with it a new currency, the euro, and a new central bank, the European Central Bank (ECB).

The European Central Bank and the central banks of the countries that have adopted the euro make up a new entity known as the "Eurosystem". As certain Member States of the European Union have not yet adopted the euro, it is important to make a distinction between the Eurosystem of 13 countries and the European System of Central Banks (ESCB), which comprises the ECB and the national central banks (NCBs) of all EU Member States (Article 107.1 of the Treaty) whether they have adopted the euro or not.

Founded on 1 June 1998, the European Central Bank (ECB) took over from the European Monetary Institute (EMI), which had played a central role in preparing for the launch of the euro on 1 January 1999.  

The seat of the European Central Bank is in Frankfurt am Main (Germany). Its staff come from all the Member States of the European Union. It enjoys total independence in its work. Neither the ECB, the national central banks of the Eurosystem, nor any member of their decision-making bodies can ask for or accept instructions from any other body. The European institutions and Member State Governments must respect this principle and must not seek to influence the ECB or the national central banks.

The ECB works in close collaboration with the national central banks in order to prepare and implement the decisions taken by the decision-making bodies: the Governing Council, the Executive Board and the General Council.

The President of the ECB and the other five members of the Executive Board are appointed by the Member States for a non-renewable term of eight years.  

The European Central Bank is the pivot of the Eurosystem. It guarantees that the tasks delegated to it are performed either by itself or via the participating national central banks.

In pursuit of its primary objective, price stability, the ECB's main missions are to:

• Define and implement the monetary policy of the euro zone;
• Conduct foreign exchange operations, hold and manage the official exchange reserves of the countries of the euro zone;
• Issue notes in the zone euro;
• Promote the smooth operation of payment systems.

It is also responsible for:

• Collecting the necessary statistical information, either from the national authorities, or directly from economic agents such as financial institutions; and
• Following developments in the banking and financial sectors, and promoting the exchange of information between the ESCB and the banking authorities.

• A prominent role for money, as signaled by the announcement of a quantitative reference value for the growth of the money supply in the broadest sense, with inflation seen as the consequence of an excessive money supply compared to the supply of goods and services; and
• A broadly based assessment of future price trends and risks to price stability in the euro zone as a whole (wages, exchange rates, long-term interest rates, various measures of economic activity, etc.).

In order to allow the public to gauge the success of the single currency policy, the ECB has announced a precise definition of its main objective. Price stability is defined as a year-on-year increase in consumer prices of less than 2%.