If Emu goes ahead as planned, an independent European Central Bank (ECB) will be established in July 1998. It will begin formulating monetary policy for the whole euro currency area from January 1 1999. The bank's statutes, which lay down how it will be run, are part of the Maastricht Treaty of 1992. The methods it will use to reach its primary goal of price stability are still under discussion and we do not yet know who will head it.
The ECB will be a fully independent central bank modelled on Germany's Bundesbank and will have a comparable aim: stable low inflation. This means that it will have full independence to make its own decisions on the monetary policy mechanisms to reach the inflation target and on the target level itself. It will therefore have far greater freedom of action than many other ostensibly independent central banks, including the newly "operationally independent" Bank of England. Unlike such banks the ECB can determine its own target rather than being held accountable to a target set by the government. Its key personnel can be dismissed only for extreme personal incapacity or misdemeanour. The hope is that the ECB will provide Emu participants with the same bedrock of low inflation that Germany has enjoyed, with the same result: a long period of economic growth.