10:38 p.m. - 2006-12-16
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The European Central Bank (ECB) prevents the euro from being trash. The ECB and the national Central Banks of the European Union member states make up the Eurosystem, whose primary tasks are to maintain price stability and to protect the purchasing power of the euro. The majority of the Bank's revenue is derived from investment earnings on its holdings of foreign-reserve assets and on capital subscribed to and paid in by the national Central Banks in amounts determined by the countries' share of population and gross domestic product in the EU.

The Central Bank responsible for the monetary system of the European Union (EU) and the euro currency. The Bank was formed in Germany in June 1998 and works with the other national Banks of each of the EU members to formulate monetary policy that helps maintain price stability in the European Union.

Investopedia Says: The European Central Bank has been responsible for the monetary policy of the European Union since January 1, 1999, when the euro currency was adopted by the EU members. The responsibilities of the ECB are to formulate monetary policy, conduct foreign exchange, hold currency reserves and authorize the issuance of Bank notes, among many other things.

Bank founded to oversee monetary policy in the European Community countries adopting the Euro common currency: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. The European Central Bank coordinates policy with the Central Banks of the 11 countries participating in the Euro zone. Collectively, the ECB and the Central Banks of the European countries make up the European System of Central Banks (ESCB). The ECB itself is run by a Governing Council, whose members are drawn from the Bank's executive board and governors of the national Central Banks. The ECB executive board, consisting of the Bank's president, vice president, and four appointed members, serve non-renewable terms of up to eight years.

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The ECB, working jointly with the national Central Banks, operates the TARGET (Trans European Automated Real-Time Gross Settlement Express Transfer) funds transfer system for large-value Euro payments. The TARGET cross-border payment system is similar to the Federal Reserve Federal Wire (Fedwire) and provides immediately available transfers of funds.

The adoption of the euro in 1999 by 11 member states of the European Union created a single currency area second in economic size only to the United States. The euro zone's monetary policy is now set by the European Central Bank (ECB) and its Governing Council rather than by individual national Central Banks. This CESifo volume examines issues that have arisen in the first years of ECB monetary policy and analyzes the effect that current ECB policy strategy and structures may have in the future.

After a detailed description and assessment of ECB monetary policy making that focuses on such issues as price stability and the predictability of policy decisions, the book turns to two important issues faced by European Central Bankers: the transparency and credibility of decision making and the ECB's deCentralized structure. After showing that transparency in decision making enhances credibility, the book discusses the ECB's efforts at openness, its political independence as guaranteed by law, and its ultimate accountability. The book then considers the effects of the deCentralized ECB structure, focusing on business cycle synchronization, inflation differentials, and differences in monetary policy transmission in light of the enlargement of the monetary union. The book also discusses options for ECB institutional reforms, including Centralization, vote weighting, and cross-border regional Banks.

"The authors succeed marvelously in providing the dosage of institutional and theoretical analysis necessary to understand the functioning of the ECB. As a result this book will be a must not only for ECB watchers but also for students interested in European affairs

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