The European Central Bank’s singular mandate is to maintain price stability within the Eurozone. The bank was launched in 1999 as a political and economic initiative in which governments kept full individual authority to spend and borrow, even as one monetary system was put in place for the entire bloc.
Today the ECB is facing major problems and integration is the most accepted approach towards recovery.
The major problems:
1. Although guidelines were put in place as to how much could be borrowed, the majority of governments have borrowed far more than the limit.
2. In southern Europe in particular, interest rates dropped and in turn, personal lending increased.
3. With the addition of more and more states, the monetary union has strained to contain individual economies of widely varying levels of competitiveness, from consistent Germany to clamorous Greece.
4. There is a general consensus from governments that the only way through this mess is greater integration. However, managing to agree on timing, costs and conditions involved is proving virtually impossible.
Without built-in exit mechanisms, any breakup threatens to be very traumatic.
This year, EU governments broadened the ECB mandate to take the role of a single supervisor for all European banks in a move to help dilute the impact of any future bailouts.
The single supervisor concept allows Europe’s bailout fund to give money directly to struggling banks, leaving governments out of the process. The transition this year will provide a significant organizational challenge, but marks a major step towards the integration marked by the Maastricht Treaty.
The current president of the ECB is Mario Daghi. The Italian leader is a strong advocate for integration and increasing competitivity of European markets. His attitude can be summed up in his pledge to ” do whatever it takes to protect the Eurozone from collapse.”