On The Plight Of The European Central Bank

It has been 10 years since the Euro first launched in 1999.During the decade, price has been stable and the inflation rate has been limited in the expecting range in the Euro-zone. Even though with stable price, Euro-zone's economy has been lower than the US,even than EU average. Except for low economy, Euro's price and international performance is less than satisfactory, not to mention to compete with US dollar in the international monetary system.As special as supra-national currency, European Central Bank is facing problems that other central banks never meet. Euro-zone has maintained stable however weak by the other means.The reason to Euro's weakness is substantially rooted in European Central Bank's internal regime and conflicts between member states.As the European Monetary System is consisted of different central banks of member states, the monetary policy should try to fulfill different need from member states while maintaining price stability. The decision power of Euro's monetary policy has been split into two parts, the European Central Bank decides the interest rate, and the European Commission has the decision power of how to influence the exchange rate. Contrast to universal monetary policy, fiscal policies of member states are diversifying. The member states adjust their tax, budget and deficit according to their need in the permission of Stability and Growth Pact. Power in European monetary system are split based on Euro-zone's special need, however, the separation of power are setting obstacles to member states to integrate monetary and fiscal policy, or flexibly deal with emergency.France and Germany are the most important member states in the Euro-zone. As the most powerful states, conflicts between France and Germany will influence the whole European Monetary System, and impacted the decision process.The independency of European Central Bank is a feature of the European Monetary System, thanks to which European Central Bank could balance the situation of the Euro-zone to make monetary decision. Meanwhile, as Euro is a supra-national currency, European Central Bank's power has been limited to interest rate, which doesn't help the integration of monetary policy and fiscal policy. A universal currency inevitably will face paradox of diversity of member states.Conflicts between member states and institutional obstacles collaborated on the dilemma of Euro,and neither of which will improve in a short time. By this means, the vision of Euro is not so clear, and its replacement of US dollar is still an unrealistic dream.