The Eurosystem consists of the European Central Bank (ECB) and the national central banks of euro area countries. The ECB was established to manage the euro and set monetary policy for the euro area. It aims to maintain price stability through its main decision-making bodies: the Governing Council and Executive Board. The ECB is independent from political influence and its primary objective is to maintain price stability in the euro area.

1. 6/9/2015
The Euro and European
Central Bank
Presentation by
Linda Muungani Halcyon Nqaba

2. ORGANISATION
The ECB is the central bank for Europe's single currency,
the euro. It was established as the core of the
Eurosystem and the European System of the Central
Banks. It has legal personality under public international
law.

3. Historical Stages of the Euro and
ECB
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4. 06/10/15
HISTORY
THREE STAGES TO ECONOMIC AND MONETARY UNION
– Stage 1:
• 1.July 1990 – Abolition of all restrictions on the movement of capital
– Stage 2:
• 1.January 1994 – Establishment of the European Monetary Institute
– Stage 3:
• 1.January 1999 – fixing of conversion rates, ECB responsible for the monetary policy

5. Adoption of the Euro
Since 1 January 1999 Europe has had a new
currency, the euro. On that date the euro
replaced the national currencies of 11
countries: , Belgium, Germany, Spain,
France, Ireland, Italy, Luxembourg, the
Netherlands, Austria, Portugal and Finland.
On 1 January 2001 it also replaced the
national currency of Greece.
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6. TO date the Euro is used in
 Austria Greece
Belgium Ireland
Cyprus Italy
Estonia Latvia
Lithuania Luxembourg
Malta The Netherlands

Portugal Slovenia

Slovakia Spain
Finland France
Germany06/10/15

7. These 19 countries are known collectively as
the euro area or the EUROZONE, 9 of the
European Union
(EU) Member States have not yet adopted the
euro: Bulgaria, Croatia, Czech Republic,
Denmark, Hungary, Poland, Romania,
Sweden and the United Kingdom. Low interest
rates due to a high degree of price stability
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8. Benefits of the Euro
1. Low interest rates due to a high
degree of price stability
The euro is as stable and credible as the best
performing currencies previously used in the
euro zone countries. This has established an
environment of price stability in the euro area,
exerting a moderating influence on price and
wage-setting.

9. Benefits of the Euro -cnt’nd
2. More price transparency
Payments can be made with the same money
in all countries of the euro area, making
travelling across these countries
easier. Price transparency is good for
consumers since the easy comparison of
price tags makes it possible for consumers
to buy from the cheapest supplier in the
euro area.

10. Benefits of the Euro cnt’nd
3. Removal of transaction costs
The launch of the euro on 1 January 1999 eliminated
foreign exchange transaction costs and thus made
possible considerable savings. Within the euro area,
there are no longer any costs arising from:
• buying and selling foreign currencies on the foreign
exchange markets;
• protecting oneself against adverse exchange rate
movements;
• cross-border payments in foreign currencies, which
entail high fees;
• keeping several currency accounts that make
account management more difficult.

11. Benefits of the Euro cnt’nd
06/10/15
4.No exchange rate fluctuations
With the introduction of the euro, exchange rate
fluctuations and therefore foreign exchange risks
within the euro area have also disappeared. In the
past, these exchange rate costs and risks hindered
trade and competition across borders.

12. Nqaba & Linda
European System of Central Banks
– EurCentral Bank
– all National Central Banks
Eurosystem
– ECB
– National Central Bank (in Euro area)
Euro area/zone
– Countries which have adopted euro

13. 06/10/15

14. Why A system?
June 2015
There are three main reasons for having a system of central banking in Europe:
1. The Eurosystem approach builds on the existing competencies of the NCBs, their
institutional set-up, infrastructure, expertise and excellent operational capabilities.
Moreover, several central banks perform additional tasks beside those of the
Eurosystem.
2. Given the geographically large euro area and the long established relationships
between the national banking communities and their NCB, it was deemed appropriate to
give the credit institutions an access point to central banking in each participating
Member State.
3. Given the multitude of nations, languages and cultures in the euro area, the NCBs
(instead of a supranational one) were best located to serve as access points of the
Eurosystem.

15. 06/10/15
DECISION MAKING
Governing Council
Executive Board
General Council

16. The highest decision-making body of the
ECB is the Governing Council. It consists
of the six members of the Executive Board
and the 19 governors of the national central
banks of the euro area. Both the Governing
Council and the Executive Board are chaired
by the President of the ECB. The key task of
the Governing Council is to formulate the
monetary policy for the euro area.
Specifically, it has the power to determine
the interest rates at which commercial banks
may obtain liquidity (money) from their
central bank.
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17. The Executive Board of the ECB consists
of the President, the Vice-President and
four other members. All are appointed by
common accord of the Heads of State or
Government of the 19 countries which
form the euro zone.
 The Executive Board is responsible for
implementing the monetary policy as
formulated by the Governing Council and
gives the necessary instructions to the
national central banks for this purpose. It
also prepares the meetings of the Governing
Council and manages the day-to-day
business of the ECB.
June 2015

18. The third decision-making body of
the ECB is the General Council. It
comprises of the President and the
Vice-President of the ECB and the
governors of all 28 national central
banks of the EU Member States. The
General Council contributes to the
advisory and co-coordinating functions
of the ECB and to the preparations for
the possible enlargement of the euro
area.
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19. 06/10/15
TASKS
Basic tasks
– Define and implement Monetary policy
– Foreign exchange operations and manage foreign
reserves of Eurozone countries
– Portfolio management
– Payment systems
Further tasks
– Issue Banknotes
– Statistics(collect the necessary info from financial
institutions of member countries)
– Financial stability & supervision
– International and European cooperation

20. June 2015
INDEPENDENCE
Price stability
European Community institutions and
states have no influence
Own budget (apart from EU
parliament)
Prohibited for granting loans to
Community bodies and governments
Functionally independent
Halcyon Moyo

21. Price stability
The primary objective of the Eurosystem is
to maintain price stability in the euro area,
thus protecting the purchasing power of the
euro.
Ensuring stable prices is the most important
contribution that monetary policy can make
to achieve a favorable economic
environment and a high level of
employment. Both inflation and deflation can
be very costly to society, economically and
socially.06/10/15

22. Price stability (cnt’nd)
In order to make it easier for the public to
assess the success of the single monetary
policy, the ECB has announced a precise
definition of its primary goal. Price
stability has been defined as a year-on-year
increase in consumer prices of below 2%.
June 2015

23. June 2015
TRANSPARENCY
Central bank provides to public all
relevant information-The ECB publishes a
consolidated weekly financial statement of the
Eurosystem.
Helps public to understand monetary
policy- more credible and effective
Credible
Self-disciplined
Predictable
Linda Muungani

24. June 2015
ACCOUNTABILITY
Precise reporting obligations
Monthly Bulletin
Monthly Press conferences
Weekly Financial Statement
Annual Report – presented to
- European Parliament
- Council of the European Union
- European Commission
- European Council
Nqaba and Linda

25. 06/10/15
EU ENLARGEMENT
New countries joined the EU on 1 May 2004
– Bulgaria and Romania are classified as
acceding countries
– Negotiations with Croatia and Turkey
Joining the euro area
– The new countries will adopt the euro
– The current euro area members had to
fulfil the same criteria
ALJA NOVAK

26. 06/10/15
EU ENLARGEMENT
Covergence reports
– The European Central Bank contributes to
the decision-making on future euro zone
members by preparing convergence
reports
Participation in decision-making bodies
– The Governors of the central banks of the
new EU contries are now members of the
General Council of the ECB

27. Joining Criteria
low inflation, sound public finances, low
interest rates and stable exchange rates.
They must also ensure the political
independence of their national central
banks. The fulfillment of these
convergence criteria – known as the
Maastricht criteria – laid a solid
foundation for the new currency before it
was launched.
06/10/15

28. 06/10/15
JOB OPPORTUNITIES
Own career development
Different skills and knowledge
Many training programs
Nqaba halcyon

29. June 2015
TRAINING PROGRAM
Launguage courses
Inter personal skills
Task-oriental skills
Managment and Leadership skills.
Tailor made courses
Extra training program

30. 06/10/15
MOBILITY SCHEMES
Meetings
Working methods and structures of
other European institutions
Halcyon

31. June 2015
JOB OPPORTUNITIES
Irrespective of:
– age
– religion
– ethnicity

32. 06/10/15