How does the European Central Bank set monetary policy?

Question

there are 27 member countries in the European Union and they all use the same Euro currency. what i'd like to know is how does the central bank set a single monetary policy/interest rate for 27 different countries? surely they'd all have different economic climates and objectives right?

Answer 1

1) Not all 27 members use the same currency. Only those who are in euro-zone do (15 members - dark/light blue color coding on graph below).

http://upload.wikimedia.org/wikipedia/co...

2) Monetary policy is set by European Central Bank: http://www.ecb.eu/mopo/html/index.en.htm...

Some of it's overriding priorities are here:

http://www.ecb.eu/mopo/intro/html/object...

And it's primary goal is to maintain price stability (low inflation). Monetary stimulation is not priority, this task is relied on local governments fiscal policies and some subsidizing programs.

All in all money are economy-neutral in long-run, and there still are a lot arguing between economists about short-run benefits, which are often doubtful (because of many negative economical/political/social issues).