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Germany

ECB Takes Stock After Ten Years

June 1 marks the 10th birthday of the European Central Bank. Although seen as one of the most powerful financial organizations in the world, it is unloved by Europeans and frequented criticized by politicians.

Euro sculpture and European Central Bank in Frankfurt,

The ECB has had a chequered ten years

The ECB was created on June 1 1998, tasked with launching the single European currency six months later in an unprecedented enterprise that marked a giant step in European integration.

The relatively smooth operation took years of preparation and changed the lives of 320 million people.

On the plus side

The single currency has made it easier to do business and compare prices, while allowing tourists to go from country to country without changing money.

"Between euro area countries, there is now more trade in goods and services, greater financial integration ... and increasing foreign direct investment and cross-border portfolio holdings, as well as sustained job creation," the ECB said in a special monthly bulletin devoted to its first decade in existence.

Since the single European currency was launched in 1999, the eurozone has generated 15 million new jobs and unemployment is at its lowest level since the early 1980s, in part owing to reforms needed to join the bloc.

The euro has now attained the rank of the world's second reserve currency after the dollar.

One sign of trust in the euro is that companies and countries emit growing numbers of bonds in the single currency, and there are now more euros circulating worldwide than dollars.

Challenges

Jean Claude Trichet

Jean Claude Trichet

Even so, the ECB continues to weather cynicism from critics, complaints that the euro stoked inflation and political crossfire over its independence and policies.

ECB president Jean-Claude Trichet stressed Thursday the need to fight persistent inflation.

The bank's target rate, of just below 2.0 percent, has never been met. In March eurozone inflation hit a record 3.6 percent, with economists forecasting similar if not higher levels in the months to come owing to soaring oil and food prices, over which the ECB has no control.

Critics say the central bank is concerned only with fighting inflation and does not consider the consequences on economic growth and employment.

Trichet counters by stressing that ensuring price stability is the best, if not the only, way to lay a foundation for long-term growth..

Goals

The ECB was born with a high-risk mission of launching the euro and managing the monetary affairs of the new eurozone, one of the biggest economies in the world.

Today, the ECB and euro are widely seen as the primary symbols of the 15-nation eurozone, formed to overcome chronic and costly currency instability; to give monetary expression to the European Union's nascent political stature; to incite members towards greater fiscal discipline; to spur competition within a single market; and to help Europeans identify with efforts towards greater integration.

But despite its sometimes heroic efforts, the ECB still stands out as a target for politicians and eurozone residents.

Following a sometimes bumpy start under the guidance of Wim Duisenberg, ECB communications have been fine-tuned since Jean-Claude Trichet took over in October 2003.

But "the improvement in communications has more to do with a mutual learning process between the ECB and markets than with the transition from Duisenberg to Trichet," Bank of America senior economist Holger Schmieding told AFP.

Unpopular

15 US$ are exchanged against 10.27 euros in an exchange office in Frankfurt, Germany

The euro has climbed to record highs recently

But whether weak against the dollar, as in 2000, or strong today, the single currency has failed to win over millions of those who use it daily.

A recent poll found one third of Germans would like to go back to deutschmarks.

More than half associated the single currency with sharply higher food and fuel prices, a sentiment found throughout the eurozone.

Counter arguments that the euro has helped buffer the eurozone from global financial turmoil, or that meeting membership criteria led to interest rates for mortgages way below what they were previously, are less well understood.

It has proved hard to provide the single currency with a cohesive identity while European political union remained more theoretical than real.

Temptation has been strong to blame the ECB, which has sole responsibility for the euro, a measure designed to thwart meddling from more than a dozen governments with varied economic and monetary agendas.

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