The faith that the public places into the central bank imposes a constant obligation on the central bank to honour this trust and fulfil the promise of stable money. The bond of trust between the public and its central bank can be seen as something like a credit relationship. Indeed, the term “credit” is Latin for “he believes”, i.e. it expresses the hope and expectation that initially one-sided trust will be reciprocated and returned in the future. Trust is given “on credit” but in turn it is based on credibility or trustworthiness. If you allow me to jump from these etymological reflections straight to the mundane tasks of central banking in practice I should like to stress the following. In the case of European Monetary Union the promise of maintaining prices stable over the medium term - and thus maintaining the value of money - is built on solid and credible institutional foundations. So far in its young life the European Central Bank has lived up to its promise and there is every reason to believe that price stability in the euro area will continue to be maintained over the medium term. Long-term bond yields and surveys of inflation expectations continue to indicate a high degree of confidence in the ECB’s ability to deliver on its primary objective over the medium term. This is what ultimately counts. For this achievement the ECB can deservedly claim some “credit”, if I may say so.
The Treaty was ratified by the parliaments and governments of all Member States of the European Union and in some cases endorsed by referendum. Thus the delegation of European monetary policy to the ECB is endowed with full democratic legitimacy. This bond of legitimacy is a crucial aspect of sound institutional foundations for monetary policy. There is no doubt that in order to be successful over the longer term, the ECB as the guardian of price stability - like any institution in a democracy will have to win and maintain the trust and support of the European public. It can and should be held accountable for fulfilling its mandate. This mandate is clear, but it is also limited. It needs to be understood what monetary policy can be expected to deliver, but also what it cannot be expected to achieve. This is particular important in the case of the European Monetary Union, which not only delegates the authority for monetary policy to an independent central bank but which also severs the traditionally close link between the currency and the nation state. Historically, currency jurisdictions and national borders have tended to coincide, at least in more recent times. This reflects the fact that the right to issue money has been seen as a key attribute of national sovereignty. Thus monetary union cannot be regarded as just a small and innocuous step of a primarily technical nature.