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European Central Bank

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The bank in general is a financial institution and the bank provides financial services and is the basis of the banking and financial system of any country 

The European Central Bank is the central bank of the European Union and is responsible for regulating fiscal and monetary policy in the eurozone. The European Banking Bank was established in 1998. The headquarters of the European Central Bank is in Frankfurt, Germany. The president of the European Central Bank is Christine Lagarde, which is the bank of the eurozone. It uses the euro currency

The European Central Bank is the institution responsible for supervising and directing the banking and monetary system in the European Union and aims in general to maintain monetary and financial stability in the eurozone and to contribute to promoting economic growth, controlling inflation and reducing unemployment. The implementation of the EU monetary policy, the issuance of euro money, the monitoring of the banking system, the management of the payments system, the regulation of credit and lending, the management of foreign currency reserves, the work as a bank for the EU and for commercial banks operating in the country, and the setting of the minimum interest rate, which in turn affects the consumption and investment behavior of society and the EU

Establishment of the European Central Bank

The European Central Bank was established on July 1, 1998 and is headquartered in Germany in Frankfurt. The first holder of the position is Wim Duisenberg, and the position is currently held by Christine Lagarde. The term of office of the European Central Bank is 8 years, non-renewable. The President of the European Central Bank chairs the Executive Board and the General Council of the European Central Bank. He is not elected in a general election, as the bank represents abroad, for example in the G-20, where the ECB president is appointed for a non-renewable eight-year term by a de facto majority vote of the European Council and is elected only by members that adopt the euro

The goals of the European Central Bank

The European Central Bank implements the monetary policy adopted by the so-called euro system, which includes the national central banks of the member states of the eurozone in addition to the European Central BankThe main objective of this policy is to ensure price stability within the Eurozone, where the inflation rate is close to 2% as an upper ceiling that may not be exceeded in accordance with the Treaty establishing the European Union.

European Central Bank management

The European Central Bank has a collective board that ensures the normal functioning of the institution and a board of governors that determines the major directions of monetary policy and the interest rates that the European Central Bank will adopt on its loans to commercial banksThe Council of the European Central Bank has six members chosen from the collective board of directors along with the central bank governors of the eurozone member statesAnd the European Central Bank actually began its work in January 1999, after the member states agreed on the system of work of this bank in May 1998. The European Central Bank is the single monetary authority of the European Union that determines the monetary policy applicable in the member states and works to reduce the duplication of policies The monetary policy applied in these countries so that this coordination between monetary policies leads to achieving the stability of the exchange rates of the euro against other currencies in the money marketsThe European Central Bank consists of a Board of Directors with two councils: the Board of Governors and the Executive CouncilThe Governor of the European Central Bank periodically attends the meetings of the European Council of Ministers, as well as the President of the European Council of Ministers attends the meetings of the Council of Governors, which is the council that advises on exchange rate arrangements, i.e. the euro exchange rates proposed by the governments of member states.The capital of the European Central Bank is 50 billion euros, and member states contribute to it in varying proportions depending on the ratio of the country’s population to the total population of the European Union, as well as according to the state’s contribution to the union’s gross domestic product. By distributing the profits resulting from it after keeping 20% ​​with him and distributing 80% to the participating European central banks according to the percentage of their contribution to the bank’s capital

The goals of the European Central Bank

The European Central Bank sets key interest rates and controls the amount of money circulating within the eurozoneMonitoring price development within the eurozone countries and assessing potential risks to price stabilityThe European Central Bank manages the foreign exchange reserves of the eurozone countries and intervenes to buy or sell currencies in order to maintain the balance of exchange rates.Contribute to monitoring the European banking and financial system and protecting its stability, as well as ensuring the proper functioning of the performance systemsThe European Central Bank enjoys a large degree of independence from political authority and adopts transparency mechanisms in order to establish the credibility of the euro as a regional and international monetary currency that deserves the confidence of markets and to ensure its stabilityAnd the European Central Bank includes only the countries of the euro area, and these countries are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Greece, Italy, the Netherlands, Malka, Portugal and other euro countries

The European Central Bank’s relationship with the economy

The European Central Bank, which follows the monetary policy of the euro system, aims to maintain the stability of exchange rates and support the general economic policy of the European Union. The monetary policy of the euro system gives priority to price stability as the most important conditions necessary to promote the continuous growth of production, create more jobs and achieve a high standard of living in the countries of the union EuropeanIn order to achieve the monetary policy pursued by the European Central Bank, the bank focuses on two basic elements:Money, as the Board of Governors of the Bank sets controls for the monetary expansion process that are consistent with maintaining price stability and achieving an appropriate growth rate, based on the fact that inflation is essentially a monetary phenomenon, at least in the long term.And some financial and economic indicators, the most important of which are the long-term interest rate, return or profits indicators, indicators of consumer and business confidence, wages and import prices of goods. Using the evaluation of these indicators, the risks to price stability are identified and quickly overcome.The European Central Bank raised the inflation target and is ready to tolerate a limited breach of the target. The new target comes as a result of the renewal of the strategy, which aims to boost the economy after years of slow performance.The euro and government bonds continued to rise after the announcement, as the single currency rose to its highest level on the day at $1.1846.The European Central Bank may allow a transition period in which inflation will be above targetThe European Central Bank’s Governing Council recommends that owner-occupied housing be included in the inflation gauge over timeClimate change considerations will be incorporated into monetary policy processes in the areas of disclosure, risk assessment, the guarantee framework and corporate asset purchasesA new strategy will be implemented starting from the monetary policy meeting on July 22

Challenges facing the European Central Bank

The central bank faces many challenges in order to write success for its monetary policy to maintain the stability of the euro, and these challenges are represented in the need to carry out a number of tasks such asThat the occurrence of any economic shocks in the member states of the Euro Club should be avoided, because the exposure of any member state to an economic shock harms the rest of the member states, and the general monetary policy of the European Central Bank is ineffective in treating the shock of this countryAnd that the national financial policies of the member states of the euro succeed in providing absolute support for the unified monetary policy of the euro system to maintain economic stability in order to succeed in maintaining price stability and achieving the credibility of the euro monetary policyAnd that the single monetary policy of the euro system succeed in achieving growth and creating job opportunities in the long term, while maintaining price stability and reducing unemployment in member states.The European Central Bank works to support the economy of the eurozone countries and pay attention to the exchange rate of the euro and monetary interest in these countries

The importance of the European Central Bank

Drawing and implementing the monetary policy of the European Union as an economic blocAnd supervise the official reserves of foreign exchange and determine how these reserves are managed and employedAnd setting controls that maintain financial and monetary stability in the European UnionIssuing bank notes and minting euro coinsDevelop and implement standards for supervision of credit institutions in the European UnionAnd work to strengthen the balance of payments of member states and their economic policies to achieve their development goalsWe note that the European Central Bank plays a key role in ensuring economic and financial stability. They manage the monetary policy of the European Union to achieve low and stable inflation. In the wake of the global financial crisis, the European Central Bank expanded its tools to deal with risks to financial stability and manage volatile exchange rates.It has used a range of traditional and unconventional tools to facilitate monetary policy, support liquidity in major financial markets, and maintain the flow of creditThe European Central Bank conducts open market transactions, either by injecting the market with liquidity or absorbing additional funds, which directly affects the level of inflation.To increase the amount of money in circulation and reduce the interest rate, i.e. the cost of borrowing, the European Central Bank can buy European government documents, bills of exchange or other EU-issued securities.This purchase can also lead to higher inflation and when it needs to absorb money to reduce inflation the European Central Bank sells government bonds in the open market which increases the interest rate and reduces borrowing.The euro system consists of the European Central Bank and of the 19 member states that are part of the eurozone. National central banks implement the monetary policy of the European Central Bank. The main objective of the European system is price stability. The secondary goals are financial stability and monetary integration. The mission statement of the euro system says That the European Central Bank and national central banks jointly contribute to achieving the goalsThe euro system is considered independent. When carrying out tasks related to the euro system, the European Central Bank may not solicit or obtain instructions from any external body and the institutions and bodies of society and the governments of member states should not seek to influence members of the decision-making bodies of the European Central Bank or national coordinating bodies in the performance of their dutiesTo define and implement the common monetary policy for the euro areaTo carry out foreign exchange operationsTo hold and manage the official foreign reserves of eurozone member statesTo promote the smooth operation of payment systems.In addition, the euro system contributes to the smooth management of the policies of the competent authorities with regard to the prudential supervision of credit institutions and the stability of the financial systemThe European Central Bank plays an advisory role towards society and national authorities in matters that fall within its field of competence, especially with regard to societal or national legislation. Economists to enable the Council to perform its tasks, and from it we find that the European Central Bank contributes and supports the European Union, the eurozone countries and the euro currency, and it is a mainstay in the economy

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