Ecb and Bol

European Central Bank and Bank of Lithuania – the role in Lithuanian economy

European central bank (ECB)

History

European central bank emerged from European Monetary Institute (EMI) in 1998. According to Mastricht Treaty it replaced EMI and granted full powers on January 1, 1999 when Euro was introduced (as accounting currency). Creation of eurozone and ECB was very important steps of European integration process. The ECB was established as the core of the Eurosystem and the ESCB. Eleven European countries (Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain) first joined eurozone by giving away it’s monetary policy to European central bank. All these countries met convergence criterias setted by the Mastricht Treaty.

The first president of ECB was Willem Frederik Duisenberg, a Dutch banker and politician. In year 2003 he was replaced by Jean-Claude Trichet, former head of Banque de France.

In January 1, 2001 Greece joined Eurozone, six years later Slovenia did it too and in the beginning of year 2008, Cyprus and Malta expanded Eurozone to fifteen countries.

With the formation of European Monetary Union (EMU), the Maastricht Treaty was developed by the Union to apply a set of criteria for each member country. These criteria were developed by the EMU to help them achieve their objective. If any country deviates from these criteria, it will be heavily fined. ECB requirements set my Maastricht Treaty: 1.) inflation of no more than 1.5 percentage points above the average rate of the three member states with the lowest inflation 2.) a national budget deficit close to or below 3 percent of gross national product and 3.) public debt not exceeding 60 percent of gross national product 4.) exchange rates which fluctuate within the normal margins of the exchange-rate mechanism (ERM) for at least two years 5.) Long-term interest rates not exceeding the average rates of these low-inflation states by more...