Professor Otmar Issing, a member of the Executive Board of the European Central Bank, assesses the first five years of the euro's life.

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Whilst the debate on the merits of adopting the euro rages on in the UK, relatively little attention is paid to the way in which the ECB is managing monetary policy in the euro zone. This upbeat assessment by Professor Issing describes the success of the first five years of the euro’s life. Not only has price stability been maintained, despite some turbulent economic times, but the financial markets appear to be convinced that the ECB will be effective in the long term in maintaining a stable price level. Professor Issing describes the mechanisms that have been used by the ECB to achieve its objectives.

Issing ends with a warning, however. EU governments must address structural difficulties in their economies, particularly in labour markets. The ECB must not be sidetracked into trying to achieve higher growth and employment, but member governments should adopt liberalising reforms.

In his commentary, David B Smith, chief economist at Williams de Broe and chairman of the IEA’s Shadow Monetary Policy Committee, agrees with Issing’s assessment. He notes, however, that the success of the ECB, welcome and important though it is, is not relevant to the arguments surrounding Britain’s membership of the euro.

2004, Occasional Papers 134, ISBN 0 255 36555 1, 91pp, PB

Further reading:

The European Institutions as an Interest Group by Roland Vaubel

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