The European Central Bank

The European Central Bank (ECB) together with the 15 individual central banks of the European Union countries constitute the European System of Central Banks. The ECB is headquartered in Frankfurt am Main, Germany, and is chartered as follows:

• The Executive Board: consisting of the president, the vice president and four other members appointed by the head of state or government of the 12 countries of the euro area.

• The Governing Council: comprising six members of the Executive Board and the 12 governors of the national central banks. The president chairs both the Executive Board and the Governing Council.

• The General Council: including the president and the vice president of the ECB and all 15 governors of the European central banks.

The Evolution of the ECB and the Euro

1992—The Treaty on European Union is signed, establishing the framework for economic and monetary union (EMU) in Europe.

1994—Establishment of the European Monetary Institute (EMI) to strengthen central bank compatibility and monetary policy coordination to prepare for the establishment of the European System of Central Banks (ESCB).

1995—The European Council agrees on the name of the European currency: the euro.

1996—Selected designs of the euro banknotes to go into circulation Jan. 1, 2002, are presented by the EMI to the European Council and the public.

1997—The Stability and Growth Pact is adopted by the European Council to ensure budgetary discipline with respect to EMU.

1998—The 11 original participating countries fulfill the necessary conditions for the adoption of the single currency as of Jan. 1, 1999. Conversion criteria are low inflation, sound public finances, low interest rates and stable exchange rates, as well as the political independence of their national central banks. (Greece would join the Eurosystem in January 2001.)

—The governments of the 11 countries appoint the president, vice president and other members of the Executive Board of the European Central Bank. This marks the establishment of the ECB and the dissolution of the EMI.

—All member countries fix their exchange rates and the conversion methods. The ECB and the national central banks of the participating member states constitute the Eurosystem.

1999—All restrictions on the movement of capital between member states are abolished.

—The euro becomes the official currency in the participating countries. All financial transactions are carried out in euro.

Jan. 1, 2002—The euro banknotes and coins circulate across all Euro-system members, and national currencies will no longer be tendered as of Feb. 28, 2002.

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