What Accession Countries Need to Know about the ECB: A Comparative Analysis of the Independence of the ECB, the Bundesbank and the Reichsbank

The popular rejection of the European constitution in France and the Netherlands triggered much debate in and around the European Central Bank (ECB) concerning the long-term viability of the euro. The region of European Monetary Union (EMU) member countries has suffered from economic strains for several years: while Germany has been in a severe economic downturn since 2001, and thus its government has implored the ECB to adopt more stimulatory monetary policy, other countries, such as Ireland and Spain, have been in the midst of an economic boom. With the prospect of a slowdown in the political process of forming a United States of Europe, a number of observers and policy-makers have begun to review the long-term viability of the European currency system. In early June 2005, politicians in Italy even publicly contemplated the possibility of leaving the euro-system and re-introducing their domestic currency, thus enabling Italy to conduct its own monetary policy, suitable for its own policy goals. Meanwhile, policy-makers in a large number of East European and Asian countries continue to favour joining the EMU and adopting the euro at the earliest possible date. Given the most recent events and discussions, and after several years of experience with the euro, it may be a suitable time to reconsider some of the potential benefits and disadvantages for new accession countries to join the euro system in the future.