Mission of the Eurosystem
According to Article 105(1) of the Treaty, the primary objective of the Eurosystem is to maintain price stability, which is defined by the Governing Council of the European Central Bank (ECB) as inflation rates below but close to 2% over the medium-term. Without prejudice to the objective of price stability, the Eurosystem supports the general economic policies of the EU with a view to contributing to the achievement of the objectives of the EU (including high employment and sustainable economic growth). Acting as a financial authority, the Eurosystem aims at safeguarding financial stability and promoting European financial integration.
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Basic tasks of the Eurosystem
The Treaty establishing the European Community entrusts the European System of Central Banks (ESCB) with the performance of central banking functions in the euro area. According to Article 105(2) of the Treaty and Article 3.1 of the Statute of the ESCB, the Eurosystem is exclusively responsible for carrying out the following basic tasks:
- to define and implement the monetary policy of the euro area;
- to conduct foreign exchange operations;
- to promote the smooth operation of payments systems; and
- to hold and manage the official foreign reserves of the Member States.
Other tasks of the Eurosystem are:
- to issue euro banknotes, which are the only banknotes that have the status of legal tender in the euro area;
- to collect statistical information necessary for the fulfilment of the Eurosystem’s tasks;
- to provide advice on the design and amendment of prudential rules and supervisory requirements;
- to promote arrangements for the maintenance of financial stability and effective management of financial crises; and
- to cooperate with international organisations on issues such as global growth and macroeconomic stability.
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Organisation of the Eurosystem
The Eurosystem is governed by the Governing Council and the Executive Board of the ECB.
The Governing Council is the main decision-making body of the ECB. It consists of the President and the Vice-President of the ECB, the other four members of the Executive Board, plus the governors of the national central banks (NCBs) of the Member States that have adopted the euro (currently 19 governors). It has the right to make the most essential strategic decisions of the Eurosystem: it is responsible for formulating monetary policy in the euro area (setting key interest rates and minimum reserves) and establishing guidelines to be followed by the NCBs of the Eurosystem in the implementation of monetary policy.
The Executive Board is responsible for preparing Governing Council meetings; implementing monetary policy for the euro area in accordance with the guidelines specified and decisions taken by the Governing Council; and managing the day-to-day business of the ECB. It consists of the President, the Vice-President and four other members.
The third decision-making body of the ESCB is the General Council, which comprises the President and the Vice-President of the ECB and the governors of the NCBs of the 28 EU Member States. It contributes to the advisory and coordinating functions of the ECB and the preparation of each enlargement of the euro area. The General Council can be regarded a transitional body, as it continues to exist on account of the fact that not all EU Member States have adopted the euro yet.
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