ABSTRACT
This chapter evaluates the 'Economic Government' of Europe; in particular, it focuses on monetary policy, whose relevance has enormously increased since the creation of the Euro. Given the political difficulties linked to the process of unification, the European construction has until been driven by economic forces. The chapter focuses more specifically on monetary policy, discussing the institutional design behind the creation of the European Central Bank (ECB), and the differences with other central Banks, namely the Fed and the Bundesbank. It gives an evaluation of the policy actually followed by the ECB. In principle, the European Central Bank follows a rule called 'the two pillars': The bank is supposed to target, on one side, money growth; on the other it targets inflation. The other crucial issue in evaluating a central bank action is the one of credibility. Within very strict limits, every central bank is constitutionally made accountable for its action in front of democratically elected bodies.
