In the sixties of 20(th) century, monetary policy was still considered as an integral part of demand oriented economic policy, the objective of which was to achieve full employment and gross national product at the level of potential product by optimal combination of fiscal and monetary policy instruments. In that context, moderate inflation was perceived as a legitimate means to achieve mentioned goals. But supply shocks and follow-up inflation advancement in the seventies led to the. understanding of the price stability achievement and sustainability as a top-priority task of monetary policy. This change. in the economic theory main stream came up at the same time with convincing arguments in favor of an independent central bank. In its monetary policy, bank of circulation independent from politicians, electors or media has the best conditions for preferring the long-term objective of price stability to the short-term economic growth and employment increase. On the contrary, politically dependent central bank, would. be,scarcely able to face the possible pressure of the government trying to bring on a favorable political economic cycle and therefore intentions declared in the anti-inflation policy wouldn't be perceived as credible by economic entities. In the effort to ensure the credibility of anti-inflation policy, it is also possible to bind monetary policy by standing rules as an alternative to an autonomous central bank. But this approach did not acquit well either. The arguments against politically, independent central bank go out particularly of. the statement that it is incompatible with elementary, democratic principles when the group of non-elected technocrats disposes of large competence and, act without direct, control carried out by the parliament. This objection can be disproved-besides the existing precedent in the form of independent courts-by a mention of indirect legitimacy of a central bank. In a final consequence, it is exactly democratically elected politicians who make the decisions about a degree of the central bank political autonomy, determine monetary policy objectives and they also name senior officials of a central bank; Moreover, various empirical studies confirm the expediency of an independent central. bank for economic development of the country. The states with an autonomous central bank show besides the lower inflation rate also low unemployment, and the rate or volatility of ecomomic growth is not negatively influenced by the independence of a central bank as well. Following these arguments, the question of what degree is the independence of their own central bank ensured to, thus becomes very important for the citizens of present and future Member States of the European Economic and Monetary Union. For the purpose of the analysis focused on a degree of autonomy of the European System of Central Banks (ESCB) and the European Central Bank (ECB), we usually distinguish between functional, institutional, personal and financial independence. Functional independence implies the question whether a central bank has adequate space for autonomous execution of monetary policy when trying to achieve certain objectives. In this point, it is very important that the ESCB can decide autonomously about a suitable monetary policy strategy. Very significant is also the fact that neither the ECB nor individual national banks are no longer allowed to provide credit to public sector organs and institutions. Potential limitation of functional independence represents exchange-rate policy, which falls within the cognizance of the Council of the European Union. In its execution of exchange-rate policy, the Council of the EU is indeed obliged to respect the primary objective of price stability as well as the independence of the ESCB. In the case of the Exchange Rate Mechanism II (ERM II), even the competence beyond the frame of the Treaty on European Union was conceded to the ESCB. Institutional independence is being connected with A question of the rate in which other bodies and institutions (government or parliament) have an opportunity to influence a decision-making process in the competent central bank gremium. In this context, when exercising the powers and carrying out the tasks and duties conferred upon them by the EU Treaty and the Statute of the ESCB, neither the ECB, nor a national central bank, nor any member of their decision-making bodies may seek or take instructions from Community institutions or bodies, from any government of a Member State or from any other body. The Community institutions and bodies and the governments of the Member States undertake to respect Us principle and not to seek to influence the members of the decision-making bodies of the ECB or of the national central banks in the performance of their tasks. None of the EU political representatives or the individual Member State representatives can even dispose of voting right in any decision-making body of the ESCB. The ECB is exclusively the subject to the European Court of Justice's juridical control as well as the European Court of Auditors' and independent external auditors' control. In the view of ensuring personal independence of the ESCB, it has to be evaluated positively in particular that the term of office for the ECB Executive Board Members is limited to a maximum of eight years and shall not be renewable. Shorter five years term of office for the presidents-of the national central banks (governors), even possibly renewable, represents kind of a risk for the independent performing of the tasks related to their function. Financial independence is achieved when a central bank disposes of an adequate amount of financial resources necessary for staying in a position to fulfil entrusted duties. Financial independence violation could result in a menace of either functional or institutional independence of a central bank. In the case of the ESCB, financial independence is guaranteed by the fact that the Budget of the ECB is separated from the Budget of the EU, as well as by the fact that not national governments, not the European Union, but the national central banks have provided basic capital of the ECB. In conclusion, it has to be underlined that there is a difference between the formal and the real independence of a central bank. Finally, general public attitude towards inflation risk determinates whether monetary policy oriented on the maintenance of price stability is successful or not. However, the European Economic and Monetary Union exists, too short to give a final verdict considering the importance that the citizens of Euro-zone attribute to a stable currency.
