Yesterday, ten years ago, the European Central Bank was founded on June 1, 1998. That’s quite a short time in comparison to other central banks like the Bank of England which is older than 300 years. However, the ECBmade the euro a success story and the single currency is shared currently by 15 of the EU’s 27 member states. After the introduction of the euro, it first fell heavily against other currencies, but after the coins and bills were introduced in January 2002, the euro began its ascendancy and gained remarkably against all major currencies, most notably against the USD. Today, the euro is the currency with the highest combined value of cash in the world and it has become the second global reserve currency. The ECB has kept inflation at small rates for 10 years and proved to act independently from political interference – especially when it rejected Nicolas Sarkozy’s calls for lower interest rates. Therefore the ECB deserves a lot of respect, because the French President is among those European politicians who tend to rather blame the ECB for economic problems in their countries than to make their economies more competitive. Since the beginning of the credit crisis, the ECB kept the interest rates at a steady rate to prevent inflation from getting out of hand.
Another very positive aspect of the euro is that it encouraged trade within the eurozone as their is no currency risk anymore and travelers don’t need to change money at each border. Besides, the central monetary policy forces some European governments to reform rather than to rely on currency depreciation to increase their country’s competitiveness. European citizens benefit from the strong euro as oil prices in euro are considerably lower as oil is traded in USD.
But despite all the benefits of the single currency, the 320 million people living in the Eurozone don’t appreciate the euro very much. Some blame the euro for higher prices in comparison to their former currencies. Especially Germans tend to convert the Euro into their former currency as the exchange rate is very simple with one euro worth two German marks. When converting the prices into German marks, they ignore that inflation would also have increased the price if the German mark were still the German currency. Other Europeans had to adjust more quickly in their minds, as the exchange rate is more complicated. Another problem is that most Europeans don’t know much about the work of the ECB and its multinational staff. The ECB has failed to build up a relation with the European people. Politicians blaming the Euro for their failures haven’t been helpful either. But despite the unease with the euro, the ECB should try to become more popular with the people. It is obvious that the eurozone countries would have faced much more difficulties if there still were 15 different currencies and 15 different central banks trying to tackle the crisis. The ECB and politicians should point at the numerous advantages of the single currency and its strength.