Independence and Co-ordination –

* The views expressed in this paper are personal. Most outsiders tend to base their analysis of the future of the Eurosystem on the shape of the Federal Reserve System in the US. This paper argues that the US model is inappropriate. It suggests that the Eurosystem is pursuing a different arrangement, where the balance of power in the national central banks rather than in the centre may continue, particularly as the EU expands. This structure affects the relationship between monetary policy and fiscal policy, the one wielded tightly by the ECB and the other by national governments subject to the Stability and Growth pact. The paper explores how the Eurosystem is developing the process of co-ordination between itself and the fiscal authorities. It concludes that this is pushing the Eurosystem towards increasing transparency in order to make its case. This process is simultaneously easing the relationship between the ECB and the European Parliament and between the NCBs and their governments and parliaments.