The European Central Bank Essay Example | Topics and Well Written Essays - 1250 words

The European Central Bank - Essay Example(ECB, n.d.)From the moment of its inception, the European Central Bank has been a favorite target of criticisms from economists and political leadership alike. Surprisingly, among its staunch critics are European countries themselves which suffer economically because of the oftentimes rigid and unreasonable policies ECB follows.This paper willing thus examine how the political and economic foundation perceives the performance of the central bank in this regard. Commentaries from analysts, studies done by independent economic research bodies, and the media will be the three main sources for this research.The list of challenges is huge and a lot of work lies in front of us. This was the concluding statement of Gertrude Tumpel-Gugerell, member of the ECB Executive Board during a speech on a multitude in Vienna, Austria in 2004. However, she was optimistic that the system would be able to handle challenges that would be present along the way. (ECB, 2004)Among the many challenges present is how to balance decision-making with regards to rate amplification to benefit all the economies of the EU member states. Because the ECB does not only cater to a single rescue, it has this inherent challenge. An increase in rate would mean a negative effect on a country with a growing economy while it is a positive move for a country with a high inflation rate. The GoCurrency website cited that several larger economies in the euro area (Germany, for example) that were recently coming out of an economic slump were unhappy as the higher place would stunt their growth.(GoCurrency, 2006)One classic example often mentioned by analysts is the effect of low interest rates in countries with property bubbles such as Ireland. Because the ECB was tutelage rates low to help the stodgy economies of France and Germany, where growth was weak and needed nurturing, the need of the Irish to raise rates to help their already ailing economy is not add ressed. (Louth, 2007) With the recent slump in mortgages in the American market, ECB is once more in the dilemma of raising rates in family or not. It should be noted that this is the first time since September 2001 that there is a proposed increase in rates. (MECB Update, 2002, p 3)Jean-Claude Trichet, President of ECB, indicated in August that the ECB will raise its key refinancing rate to 4.25 from 4.0. (TodayOnline, 2007) However, there has been pressure from the world community to halt this mean rate increase. The article that appeared on the Business World website authorize NCB Another ECB hike could be risky, quoted NCB analyst Dermot OBrien as saying that the credibility of the ECB may be in question if it does not proceed with the intended rise in rates and sticking to its original plan would be seen as immature stubbornness. This is the current dilemma. (Business World, 2007)With the surprisingly weak growth figures for the