Central bankers in Europe have always resented the narrow monetary policy mandate given to the ECB under the Maastricht Treaty.

True, there is no inflation problem in the short run, but the ECB s monetary policy focuses on the medium term.

Governments lack a national currency to depreciate, and lack the power to relax credit, having delegated monetary policy to the European Central Bank.

The ECB s supervisory role will be fully separated from its monetary policy responsibilities.

A Wake Up Call for the ECB

The honeymoon for the European Central Bank is over. Because European interest rates no longer are clearly out of whack with the fundamentals of the euro zone economy, monetary policy has become more complex.

They must instead rely on the European Central Bank (ECB) to enact monetary policy.

De Nationalizing the ECB s Executive Board

Now, however, it may try to stop the European Central Bank s so called outright monetary transactions (OMT) program (the ECB s pledge to buy, without limit, the government bonds of troubled eurozone countries that subject themselves to the ESM s conditions).

Why the ECB Should Buy American

The honeymoon for the European Central Bank is over.

For example, Italian politicians, who, given Italy s recent dismal economic performance, would seem the least qualified to offer the ECB advice on monetary policy, are nonetheless advocating interest rate cuts.

In the eurozone s member countries, only fiscal policy is possible at the national level, because the European Central Bank controls monetary policy.

Meanwhile, in Germany, the elections this September may have surprising consequences for ECB monetary policy.

Expect more ECB bashing.

The ECB will object, not without reason, that monetary policy is a blunt instrument with which to rebalance the European economy.

There will also be potentially dangerous consequences for the ECB itself.

This second view has characterized the European Central Bank s approach to monetary policy since the start of the financial crisis.

A Spanish government that did likewise would lose all prospect of support from the ECB s OMT program, and the markets would quickly pounce.

Having agreed to delegate responsibility for monetary policy to the European Central Bank, most governments put up fierce resistance to any further transfer of sovereignty.

But blindly sticking to principle would have been a highly risky option for the ECB.

The board would constitute the fiscal counterpart of the European Central Bank it would also be the European counterpart of the International Monetary Fund.

The Paris meeting affords the ECB an opportunity to make a political statement its Declaration of Independence, so to speak by raising interest rates on French soil.

The first option, a sharp weakening of the euro, is unlikely, as Germany is strong and the ECB is not aggressively easing monetary policy.

This is paradoxical, because the ECB s policy framework provides clear guidance.

In the original plan for the European Central Bank, the proposed institution would have had overall supervisory and regulatory powers.

Of course, the IOUs now lodged with the ECB may themselves have to be written down, threatening to undermine the ECB s own balance sheet.

It is doubtful that the ECB would raise interest rates to curb excess liquidity so long as economic recovery remains in question.

The ECB statute was not engraved on stone tablets and handed down on Mount Sinai.

The OMT program, which allows the ECB to buy sovereign bonds of countries that have agreed to reform their economies, significantly levels the playing field between the Bank and its advanced economy peers.

It could agree to swift bank recapitalization, a banking license for the European Stability Mechanism, and a more expansionary ECB policy.

The ECB is not the old Bundesbank, which had such public support and trust in Germany that it could get away with almost anything.

A major concern of the German Constitutional Court is the similarity between the ESM s Secondary Market Support Facility (SMSF) and the ECB s OMT program, both of which imply the purchase of government bonds in secondary markets.

The European Central Bank would also be prepared to attend a meeting to clarify terms of reference.

Similarly, Germans have been critical of the ECB s monetary policy instruments, especially its outright monetary transactions program, with opponents appealing to the German constitutional court to invalidate the OMT scheme s conditional purchases of eurozone government debt.

Fixing the exchange rate and delegating monetary policy to the European Central Bank eliminated two primary means by which national governments stimulate their economies to avoid recession.

But, with the single currency in place, the road to solving a fiscal crisis through inflation has been closed, as the European Central Bank (ECB) now stands watch over monetary policy.

The European Central Bank should ease monetary policy in order to weaken the value of the euro and bootstrap the periphery s growth.

But the OMT scheme is also condemned for exceeding the ECB s mandate.

Indeed, even the markets were fooled, giving the ECB a good grade for its unremarkable rate hike.

And financial stability is again a central bank responsibility, including for the more conservative European Central Bank.

It might even force the ECB to abandon OMT.

Economy The Central Bank of Venezuela is responsible for developing monetary policy for the Venezuelan bolívar which is used as currency.

But the official sector cannot write down its debt, because that would violate a number of taboos, particularly for the ECB.

A legal vestige of the original plan may offer an easy path to a greater ECB supervisory role today.