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Lagarde: The euro is the strongest form of European integration



Slovenia introduced the common European currency in 2007

“The ECB, committed to price stability, will always act as the foundation of efforts for a united Europe that protects all citizens with joint efforts and works for the good of all,” Christine Lagarde said ahead of the 25th anniversary of the founding of the European Central Bank.

In her blog, the President of the ECB summarized the words of the former President of the European Parliament, Simone Veil, that we need a Europe that enables solidarity, independence and cooperation. “These words sum up everything that the euro stands for, because the euro is more than just a currency. It is the strongest form of European integration and represents a Europe that protects all citizens with joint powers and works for the good of all.” she wrote and emphasized that today, after the US dollar, the euro is the second most important currency in the international monetary system.

According to her, the European Monetary Union has been put to the test several times over the past quarter of a century. “We have been hit by several crises that could destroy us,” she cited and mentioned the great financial crisis, the sovereign debt crisis and the covid-19 pandemic. “But we came out of each of them stronger,” she said. In unpredictable times, Europe has an opportunity to strengthen its resilience by integrating capital markets and completing the banking union, she estimated.

She reminded that stability is not self-evident, which, according to her, was pointed out by the covid-19 pandemic and Russia’s unjustified war in Ukraine. Recent events in the banking sector have reminded us that monetary policy performs its tasks more easily if it is supported by a robust banking system. “Financial stability is a condition for price stability and vice versa,” she emphasized.

The ECB’s biggest challenge is the fight against high inflation: “It was too low for many years, but now it is too high and will most likely stay that way for too long. This undermines the value of money, reduces purchasing power and harms people and businesses.But according to her belief, it will be lowered back to the target level of two percent in the medium term: “That is why we are raising interest rates at a record pace. We will raise them to a sufficiently restrictive level and keep them there for so long that inflation will return to the target level as soon as possible.”

Lagarde has been at the head of the ECB since 2019. Photo: Reuters

Euro banknotes and coins in use since 2002

The establishment of the ECB followed the decision of EU leaders in May 1998, by which they confirmed the readiness of Belgium, the Netherlands, Luxembourg, Germany, France, Italy, Ireland, Austria, Spain, Portugal and Finland to introduce the European currency group, the euro, in 1999. At that time, the euro was introduced as book money, while euro banknotes and coins began to be used in these countries in 2002.

The ECB took over the leadership of the single monetary policy, the Pact on Stability and Growth came into force, which is the framework for fiscal policy coordination in the European Economic and Monetary Union. The ECB had 400 employees in June 1998, and today employs more than 4,200 people. Before Christine Lagarde, it was led by Wim Duisenberg, Jean-Claude Trichet and Mario Draghi. The main decision-making body in the ECB is the ECB Council, headed by the President of the ECB and representatives of the central banks of the euro area countries, including the Governor of the Bank of Slovenia, Boštjan Vasle.

In 25 years, nine more countries joined the euro zone – Slovenia introduced the euro in 2007 – bringing the number of members to 20. The main tasks of the ECB and member central banks, including the Bank of Slovenia, are to define and implement common monetary policies, operation on the currency markets, management of foreign exchange reserves of members and care for the operation of the payment system. Among the more recent tasks, one of the more important is the supervision of European banks.

Source: Rtvslo

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