The European Central Bank (ECB) is the institution The European Union is governed by seven institutions. Article 13 of Treaty on European Union lists them in the following order: the European Parliament, the European Council, the Council of the European Union (the Council); the European Commission, the Court of Justice of the European Union, the European Central Bank and the Court of Auditors of the European Union The European Union is an economic and political union of 27 member states which are located primarily in Europe. Committed to regional integration, the EU was established by the Treaty of Maastricht in 1993 upon the foundations of the European Communities. With over 500 million citizens, the EU combined generated an estimated 28% share (US$ 16.5 (EU) tasked with administrating the monetary policy Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest. Monetary policy is usually used to attain a set of objectives oriented towards the growth and stability of the economy. These goals usually include stable prices and low unemployment. Monetary theory of the 16 EU member states A Member State of the European Union is any one of the 27 sovereign states that have acceded to the European Union since its inception in 1951 as the European Coal and Steel Community (ECSC). From an original membership of six states, there have been six successive enlargements, the largest occurring on 1 May 2004, when ten states joined. The EU taking part in the Eurozone The eurozone ( pronunciation ), officially the euro area, is an economic and monetary union (EMU) of 16 European Union (EU) member states which have adopted the euro currency as their sole legal tender. It currently consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal,. It is thus one of the world's most important central banks A central bank, reserve bank, or monetary authority is a banking institution granted the exclusive privilege to lend a government its currency. Like a normal commercial bank, a central bank charges interest on the loans made to borrowers, primarily the government of whichever country the bank exists for, and to other commercial banks, typically as. The bank was established by the Treaty of Amsterdam The Treaty of Amsterdam amending the Treaty of the European Union, the Treaties establishing the European Communities and certain related acts, commonly known as the Amsterdam Treaty, was signed on 2 October 1997, and entered into force on 1 May 1999; it made substantial changes to the Treaty on European Union, which had been signed at Maastricht in 1998, and is headquartered in Frankfurt Frankfurt am Main (German pronunciation: [ˈfʁaŋkfʊɐt am ˈmaɪn] , English: /ˈfræŋkfərt/), commonly known simply as Frankfurt, is the largest city in the German state of Hesse and the fifth-largest city in Germany, with a 2009 population of 667,330. The urban area had an estimated population of 2,295,000 in 2010. The city is at the centre, Germany A region named Germania, inhabited by several Germanic peoples, has been known and documented before AD 100. Beginning in the 10th century, German territories formed a central part of the Holy Roman Empire, which lasted until 1806. During the 16th century, northern Germany became the centre of the Protestant Reformation. As a modern nation-state,. The current President The President of the European Central Bank is the head of the European Central Bank , the institution responsible for the management of the euro and monetary policy in the Eurozone of the European Union (EU) of the ECB is Jean-Claude Trichet Jean-Claude Trichet is a French civil servant who is the current president of the European Central Bank, a position he has held since 2003. He is also a member of the Board of Directors of the Bank for International Settlements. Trichet ranks 5th on Newsweek's list of the world's most powerful along with economic triumvirs Ben Bernanke (4th) and.

History

The European Central Bank is the de facto De facto is a Latin expression that means "by [the] fact". In law, it is meant to mean "in practice but not necessarily ordained by law" or "in practice or actuality, but without being officially established". It is commonly used in contrast to de jure when referring to matters of law, governance, or technique (such successor of the European Monetary Institute The European Monetary Institute was the forerunner of the European Central Bank (ECB). It encouraged cooperation between the national banks of the member states of the EU (EMI). The EMI was established at the start of the second stage of the EU's Economic and Monetary Union The economic and monetary union of the European Union is the currency union of the European Union members who have adopted the euro as their sole legal tender. Full economic and monetary union has been in effect since 1 January 2002 for twelve countries, with further members joining since. For the European Union, economic and monetary union (EMU) (EMU) to handle the transitional issues of states adopting the euro The euro is the official currency of the Eurozone: 16 of the 27 Member States of the European Union (EU) and is the currency used by the EU institutions. The eurozone consists of Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain. Estonia is due to and prepare for the creation of the ECB and European System of Central Banks The European System of Central Banks is composed of the European Central Bank (ECB) and the national central banks (NCBs) of all 27 European Union (EU) Member States (ESCB). The EMI itself took over from the earlier European Monetary Co-operation Fund The European Monetary Cooperation Fund is an institution and a fund established in 1973 by members of the Exchange Rate Mechanism (ERM) of the European Union to stabilize exchange rates. It is now part of the European Central Bank (EMCF).^[1]

The ECB formally replaced the EMI on 1 June 1998 by virtue of the Treaty on European Union The Maastricht Treaty was signed on 7 February 1992 in Maastricht, the Netherlands after final negotiations on 9 December 1991 between the members of the European Community and entered into force on 1 November 1993 during the Delors Commission. It created the European Union and led to the creation of the euro. The Maastricht Treaty has been (TEU, Treaty of Maastricht), however it did not exercise its full powers until the introduction of the euro The euro came into existence on the 1 January 1999, although it has been a goal of the European Union and its predecessors since the 1960s. After tough negotiations, particularly due to opposition from the United Kingdom, the Maastricht Treaty entered into force in 1993 with the goal of creating economic and monetary union by 1999 for all EU on 1 January 1999, signalling the third stage of EMU. The bank was the final institution needed for EMU, as outlined by the EMU reports of Pierre Werner Pierre Werner was a Luxembourg politician. Pierre Werner was born in Saint-André-lez-Lille, Nord, France to parents from Luxembourg. During the Nazi occupation of Luxembourg (1940-45) Werner, working as a banker, gave clandestine support to the resistance against the occupation forces. After World War 2 he became the Controller of the banking and President The President of the European Commission is the most powerful office in the European Union, as the head of the European Commission, the executive branch of the European Union. The President is responsible for allocating portfolios to members of the Commission and can reshuffle or fire them if needed. He determines the Commission's policy agenda Jacques Delors Jacques Lucien Jean Delors is a French economist and politician, the only person to have served two terms as President of the European Commission (between 1985 and 1995).^[1] It was established on 1 June 1998.^[2]

The first President of the Bank The President of the European Central Bank is the head of the European Central Bank, the institution responsible for parts of the economic governance of the Euro Area of the European Union . Presidents are appointed by the European Council (EU) was Wim Duisenberg Willem Frederik "Wim" Duisenberg was a Dutch Politician, Economist and Financier. He was first President of the European Central Bank from 1998 until 2003, and was instrumental in the Introduction of the euro in the European Union in 2002. He was also credited for making numeral improvements for the Economy of the Netherlands, the former president of the Dutch central bank De Nederlandsche Bank is the central bank of the Netherlands. It is part of the European System of Central Banks (ESCB) and the European Monetary Institute The European Monetary Institute was the forerunner of the European Central Bank (ECB). It encouraged cooperation between the national banks of the member states of the EU. While Duisenberg had been the head of the EMI (taking over from Alexandre Lamfalussy Born in Hungary, Lamfalussy studied at the Catholic University of Leuven and Nuffield College, Oxford, where he received his doctorate in economics. He later taught at the Université catholique de Louvain and Yale of Belgium Belgium (pronounced /ˈbɛldʒəm/ , BEL-jəm), officially the Kingdom of Belgium, is a country in northwest Europe. It is a founding member of the European Union and hosts its headquarters, as well as those of other major international organizations, including NATO. Belgium covers an area of 30,528 square kilometres (11,787 sq mi), and it has a) just before the ECB came into existence, the French government wanted Jean-Claude Trichet Jean-Claude Trichet is a French civil servant who is the current president of the European Central Bank, a position he has held since 2003. He is also a member of the Board of Directors of the Bank for International Settlements. Trichet ranks 5th on Newsweek's list of the world's most powerful along with economic triumvirs Ben Bernanke (4th) and, former head of French central bank The Banque de France is the central bank of France; it is linked to the European Central Bank . Its main charge is to implement the interest rate policy of the European System of Central Banks (ESCB). It is headquartered in Paris, to be the ECB's first president. The French argued that since the ECB was to be located in Germany, its President should be French. This was opposed by the German, Dutch and Belgian governments who saw Duisenberg as a guarantor of a strong euro.^[3] Tensions were abated by a gentleman's agreement in which Duisenberg would stand down before the end of his mandate, to be replaced by Trichet, an event which occurred in November 2003.

There had also been tension over the ECB's Executive Board, with the United Kingdom The United Kingdom of Great Britain and Northern Ireland[note 7] is a sovereign state located off the northwestern coast of continental Europe. It is an island country, spanning an archipelago including Great Britain, the northeastern part of the island of Ireland, and many small islands. Northern Ireland is the only part of the UK with a land demanding a seat even though it had not joined the Single Currency.^[3] Under pressure from France three seats were assigned to the largest members, France France (pronounced /ˈfrænts/ frantss or /ˈfrɑːnts/ frahnts; French pronunciation (help·info): [fʁɑ̃s]), officially the French Republic (French: République française, pronounced: [ʁepyblik fʁɑ̃sɛz]), is a state in Western Europe with several of its overseas territories and islands located on other continents and in the Indian,, Germany A region named Germania, inhabited by several Germanic peoples, has been known and documented before AD 100. Beginning in the 10th century, German territories formed a central part of the Holy Roman Empire, which lasted until 1806. During the 16th century, northern Germany became the centre of the Protestant Reformation. As a modern nation-state,, Italy Italy (pronounced /ˈɪtəli/ ; Italian: Italia [iˈtaːlja]), officially the Italian Republic (Italian: Repubblica italiana), is a country located partly on the European Continent and partly on the Italian Peninsula in Southern Europe and on the two largest islands in the Mediterranean Sea, Sicily and Sardinia. Italy shares its northern, Alpine and Spain Spain (pronounced /ˈspeɪn/ spayn; Spanish: España, pronounced [esˈpaɲa] ( listen)), officially the Kingdom of Spain (Spanish: Reino de España), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula.[note 6] Its mainland is bordered to the south and east by the Mediterranean Sea except for. Despite such a system of appointment the board asserted its independence early on in resisting calls for interest rates and future candidates to it.^[3]

When the ECB was created, it covered a Eurozone of eleven members. Since then, Greece Greece (English: /ˈɡriːs/ ; Greek: Ελλάδα, Elláda, IPA: [eˈlaða] ( listen); Ancient Greek: Ἑλλάς, Hellás, IPA: [helːás]), also known as Hellas and officially the Hellenic Republic (Ελληνική Δημοκρατία, Ellīnikī́ Dīmokratía, IPA: [eliniˈci ðimokraˈtia]), is a country in southeastern Europe, situated on joined in January 2001, Slovenia Slovenia /sloʊˈviːniə/ sloh-VEE-nee-ə, officially the Republic of Slovenia (Slovene: Republika Slovenija, [reˈpublika sloˈveːnija] (help·info)), is a country in Central Europe touching the Alps and bordering the Mediterranean. Slovenia borders Italy on the west, the Adriatic Sea on the southwest, Croatia on the south and east, Hungary on in January 2007, Cyprus Cyprus (pronounced /ˈsaɪprəs/ ; Greek: Κύπρος, Kýpros, IPA: [ˈcipros]; Turkish: Kıbrıs), officially the Republic of Cyprus (Greek: Κυπριακή Δημοκρατία, Kypriakī́ Dīmokratía, IPA: [cipriaˈci ðimokraˈtia]; Turkish: Kıbrıs Cumhuriyeti) is an Eurasian island country in the Eastern Mediterranean, south of Turkey and Malta Malta /ˈmɔːltə/ , officially the Republic of Malta (Maltese: Repubblika ta' Malta), is a southern European country and consists of an archipelago situated centrally in the Mediterranean, 93 km south of Sicily and 288 km east of Tunisia, with the Strait of Gibraltar 1,826 km to the west and Alexandria 1,510 km to the east in January 2008, and Slovakia The Slovak Republic (short form: Slovakia /sloʊˈvɑːkiə/ ; Slovak: Slovensko (help·info), long form Slovenská republika (help·info)) is a state in Central Europe. It has a population of over five million and an area of about 49,000 square kilometres (19,000 sq mi). Slovakia is a landlocked country bordered by the Czech Republic and Austria in January 2009, enlarging the bank's scope and the membership of its Governing Council.^[1]

On December 1, 2009 Treaty of Lisbon entered into force, ECB according to the article 13 of TFEU, gained official status of an EU institution The European Union is governed by seven institutions. Article 13 of Treaty on European Union lists them in the following order: the European Parliament, the European Council, the Council of the European Union (the Council); the European Commission, the Court of Justice of the European Union, the European Central Bank and the Court of Auditors.

Powers and objectives

The primary objective of the ECB is to maintain price stability Inflation can have positive and negative effects on an economy. Negatives of inflation include: uncertainty about future inflation may discourage investment and saving, and high inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future. Positives include debt relief by reducing the within the Eurozone, or in other words to keep inflation In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit low. The Governing Council defined price stability as inflation (Harmonised Index of Consumer Prices The Harmonised Index of Consumer Prices is an indicator of inflation and price stability for the European Central Bank (ECB). It is a consumer price index which is compiled according to a methodology that has been harmonised across EU countries. The euro area HICP is a weighted average of price indices of member states who have adopted the euro) of below, but close to, 2%.^[4]. Unlike for example the United States Federal Reserve Bank, the ECB has only one primary objective with other objectives subordinate to it.

The key tasks of the ECB are to define and implement the monetary policy Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest. Monetary policy is usually used to attain a set of objectives oriented towards the growth and stability of the economy. These goals usually include stable prices and low unemployment. Monetary theory for the Eurozone, to conduct foreign exchange operations, to take care of the foreign reserves Foreign exchange reserves in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, SDRs and IMF reserve positions. This broader figure is more readily available, but it is more accurately termed official of the European System of Central Banks and promote smooth operation of the financial market infrastructure under the Target payments system^[5] and being currently developed technical platform for settlement of securities in Europe (TARGET2 Securities). Furthermore, it has the exclusive right to authorise the issuance of euro banknotes Euro banknotes are the banknotes of the euro, the currency of the eurozone . They have been in circulation since 2002 and are issued by the European Central Bank (ECB), each bearing the signature of the President of the European Central Bank. Denominations of notes range from €5 to €500 and, unlike euro coins, the design is identical across. Member states can issue euro coins but the amount must be authorised by the ECB beforehand (upon the introduction of the euro, the ECB also had exclusive right to issue coins^[5]).

The bank must also co-operate within the EU and internationally with third bodies and entities. Finally it contributes to maintaining a stable financial system and monitoring the banking sector.^[6] The latter can be seen, for example, in the bank's intervention during the 2007 credit crisis when it loaned billions of euros to banks to stabilise the financial system.^[7] In December 2007 the ECB decided in conjunction with the Federal Reserve under a program called Term auction facility to improve dollar liquidity in the eurozone and to stabilise the money market.^[8]

Organisation

The Executive Board is responsible for the implementation of monetary policy defined by the Governing Council and the day-to-day running of the bank. In this it can issue decisions to national central banks and may also exercise powers delegated to it by the Governing Council. It is composed of the President of the Bank (currently Jean-Claude Trichet), a vice president and four other members. They are all appointed by common accord of the eurozone member states for non-renewable terms of eight years.

The General Council is a body dealing with transitional issues of euro adoption, for example fixing the exchange rates of currencies being replaced by the euro (continuing the tasks of the former EMI). It will continue to exist until all EU Member States adopt the euro, at which point it will be dissolved. It is composed of the President and Vice President together with the governors of all of the EU's national central banks.^[9][10]

Independence and future

Furthermore, not only must the bank not seek influence, but EU institutions and national governments are bound by the treaties to respect the ECB's independence. For example, the minimum term of office for an national central bank governor is five years and members of the executive board have a non-renewable eight-year term.^[11] To offer some accountability, the ECB is bound to publish reports on its activities and has to address its annual report to the European Parliament, the European Commission, the Council of the European Union and the European Council.^[12] The European Parliament also gets to question and then issue its opinion on candidates to the executive board.^[13]

The bank's independence has notably come under intense criticism since the election of Nicolas Sarkozy as French President. Sarkozy has sought to make the ECB more susceptible to political influence, to extend its mandate to focus on growth and job creation, and has frequently criticised the bank's policies on interest rates.

Location

The bank is based in Frankfurt, the largest financial centre in the Eurozone. Its location in the city is fixed by the Amsterdam Treaty along with other major institutions.^[14] In the city, the bank currently occupies Frankfurt's Eurotower until its purpose-built headquarters are built.^[15]

In 1999 an international architectural competition was launched by the bank to design a new building. It was won by a Vienna-based architectural office named Coop Himmelbau. The building will be approximately 180 metres (591 ft) tall (the present building is 148 m/486 ft) and will be accompanied with other secondary buildings on a landscaped site on the site of the former wholesale market (Großmarkthalle) in the eastern part of Frankfurt am Main. The main construction work will commence in October 2008, with completion scheduled during 2014.^[16][17] It is expected that the building will become an architectural symbol for Europe and is designed to cope with double the number of staff who operate in the Eurotower.^[15]

See also

References

1. ^ ^{a b c} "European Central Bank". European NAvigator. http://www.ena.lu?lang=2&doc=8034. Retrieved 15 October 2007.
2. ^ ECB: Economic and Monetary Union
3. ^ ^{a b c} "The third stage of Economic and Monetary Union". European NAvigator. http://www.ena.lu?lang=2&doc=14950. Retrieved 16 October 2007.
4. ^ "Powers and responsibilities of the European Central Bank". European Central Bank. http://www.ecb.int/ecb/orga/tasks/html/index.en.html. Retrieved 10 March 2009.
5. ^ ^{a b} Fairlamb, David; Rossant, John (12 February 2003). "The powers of the European Central Bank". BBC News. http://news.bbc.co.uk/1/hi/business/business_basics/86006.stm. Retrieved 16 October 2007.
6. ^ "The European Central Bank (ECB)". Europa (web portal). http://europa.eu/scadplus/leg/en/lvb/o10001.htm. Retrieved 16 October 2007.
7. ^ Lander, Mark (14 August 2007). "Credit Squeeze Puts Europe's Bank in Spotlight". New York Times. http://www.nytimes.com/2007/08/14/business/worldbusiness/14euro.html?_r=1&n=Top/Reference/Times%20Topics/Organizations/E/European%20Central%20Bank&oref=slogin. Retrieved 16 October 2007.
8. ^ "ECB press release on dollar liquidity". ECB. http://www.ecb.int/press/pr/date/2008/html/pr080110_2.en.html.
9. ^ "Composition of the European Central Bank". European NAvigator. http://www.ena.lu?lang=2&doc=8035. Retrieved 15 October 2007.
10. ^ "The General Council". European Central Bank. http://www.ecb.europa.int/ecb/orga/decisions/genc/html/index.en.html. Retrieved 15 October 2007.
11. ^ "Independence". European Central Bank. http://www.ecb.int/ecb/orga/independence/html/index.en.html. Retrieved 15 October 2007.
12. ^ "Accountability". European Central Bank. http://www.ecb.int/ecb/orga/accountability/html/index.en.html. Retrieved 15 October 2007.
13. ^ "Executive Board" (PDF). Banque de France. 2005. http://www.banque-france.fr/gb/eurosys/telechar/europe/Directoire_GB.pdf. Retrieved 15 October 2007.
14. ^ "Consolidated versions of the treaty on European Union and of the treaty establishing the European Community" (PDF). Eur-lex. http://eur-lex.europa.eu/LexUriServ/site/en/oj/2006/ce321/ce32120061229en00010331.pdf. Retrieved 12 June 2007.
15. ^ ^{a b} Dougherty, Carter. "In ECB future, a new home to reflect all of Europe". International Herald Tribune. http://www.iht.com/articles/2004/11/16/ecb_ed3_.php. Retrieved 2 August 2007.
16. ^ "Winning design by Coop Himmelb(l)au for the ECB's new headquarters in Frankfurt/Main". European Central Bank. http://www.ecb.int/ecb/premises/html/image29.en.html. Retrieved 2 August 2007.
17. ^ "Launch of a public tender for a general contractor to construct the new ECB premises". European Central Bank. http://www.ecb.int/press/pr/date/2007/html/pr070710_3.en.html. Retrieved 2 August 2007.

External links

• European Central Bank, official website.
• New ECB Premises, official website.
• The European Central Bank, European NAvigator.
• European Central Bank: history, role and functions, ECB website.
• Infocheese: ECB
• forex-history.net, historical currency charts based on the data published daily by the ECB.
• ECB Intelligent guess, Historical bank rate (since 2000) based on the data published by the ECB.
• World Interest Rates, Europe Interest Rates data and chart, updated by ForexMotion.com.

Categories: European System of Central Banks | Eurozone fiscal matters | Central banks | 1998 establishments | Frankfurt | Institutions of the European Union

See Also:

• European Union: Encyclopedia

What Links Here:

Recently Viewed Pages:

• Home
• Science: Agriculture: Field Crops: Cereals: Sorghum: Pests and Diseases: Directory
• Biotechnology: Blogs
• Cocoa Bean: Encyclopedia
• Rye: Answers
• Cash Crop: Answers
• Cocoa Bean: Images
• Root Crops: Encyclopedia
• Science: Agriculture: Field Crops: Root Crops
• Sugar Beet: Answers

Most Popular Pages:

• Monoculture: Answers
• Oilseeds: Blogs
• Science: Agriculture: Field Crops: Cereals: Sorghum: Pests and Diseases: Directory
• Sugar Beet: Answers
• Subsistence Agriculture: Encyclopedia
• Cash Crop: Answers
• Category:Agricultural Terminology: Blogs
• Post-harvest Handling: News
• Rye: Answers
• Barley: Answers

Related 'European Central Bank' Searches: