c) Development of a single monetary policy having an objective of price
stability and the support to the economic policies of the Member States in
general.- European Central Bank :
The responsibilities between the European Central Bank and national Central Banks are
to be shared on the following principles:
- Principle of non-divisibility of decisions relating to monetary policy.
The responsibility of defining the monetary policy is to be centralized at
the level of the governing council and the top management of the
European Central Bank. - Principles of subsidiary : In the areas which do not exclusively fall
within the competence of the European Central Bank, it is expected to
intervene only as a last resort, i.e., if it is considered that certain objectives
cannot be realized by the national banks, left to themselves.
The European Monetary Institute has been established at Frankfort. The objective of the
Institute is to reinforce the coordination among the Member States and work towards the
creation of the European Central Bank. It is required to promote and supervise the
economic convergence of different countries as also promote and facilitate the use of
ECU.
The Member Countries have to respect 5 criteria in order to have common currency:
a) Rate of inflation should not be more than 1.5 per cent higher than the
mean of three best Member States;
b) Budgetary deficit should not be more than 3 per cent of GDP, except in
the exceptional circumstance;
c) Public debt should not be higher than 60 per cent of GDP except if it is
reducing regularly towards this threshold;
d) Interest rate should not be more than 2 per cent higher than that of three
best States (in matter of inflation);
e) Country should have been a member of EMS at least for two years, while
respecting narrowest fluctuation margins.On setting up of EMU the entire European Union will have a single currency.