The Eurosystem is an organization formed by the European Central Bank (ECB) and by the National Central Banks of the member states of the European Union that have adopted the euro as their common currency.


Indeed, the Eurosystem acts as a “virtual” entity since it lacks legal personality and its governing bodies are those of the European Central Bank.

In principle, it is the ESCB that aspires to become the monetary authority of the EU. However, when it comes to a common monetary policy, it can only affect those countries that have joined the euro. For this reason, the transitory term of the Eurosystem was created until all EU countries decide to exchange their national currency for the euro.

As regards the European Central Bank, it is responsible for the monetary policy of the EU and has its own legal personality. As for the national central banks, they also have their own legal personality and carry out independent functions in addition to fulfilling the objectives of the Eurosystem.

The difference between the European System of Central Banks (ESCB) and the Eurosystem needs to be clarified. Both incorporate the European Central Bank but, on the one hand, the ESCB includes both national central banks that have adopted the euro as a common currency and those that have not. Whereas, the Eurosystem only includes the central banks of the member states that have adopted the euro as their common currency. In this sense, the Eurosystem would be a subgroup of the European System of Central Banks.

Functions of the Eurosystem

In the Treaty on European Union (TEU), the objectives of the ESCB are discussed. The main function is to maintain the stability of prices in the euro zone. In other words, controlling inflation thus protecting the value of the euro. In addition, functions are established to support the general policies of the Union.

In practice, it is the Eurosystem that carries out all these functions. The TEU refers to the ESCB since it was initially expected that all countries would incorporate the euro currency. However, this situation has not yet occurred and the functions currently carried out by the Eurosystem are as follows:

  • Definition and execution of the single monetary policy.
  • Carrying out foreign exchange operations in accordance with the established exchange policy.
  • Management of official reserves in foreign currency of the countries of the euro zone.
  • Issuance of eurozone banknotes.
  • Contribution to the proper functioning of the payment system.

Actually, the European Central Bank has the task of guaranteeing the fulfillment of all these functions attributed, initially, to the ESCB. Efforts have been made to outsource activities in order to establish synergies and avoid duplicating tasks. Furthermore, proper coordination between national central banks and the European Central Bank favors the achievement of objectives.

Composition of the Eurosystem

The composition of the Eurosystem is as follows:

  • European Central Bank.
  • 19 national banks that have incorporated the euro as the single currency of the following countries:
    • Germany, Austria, Belgium, Cyprus, Slovakia, Slovenia, Spain (Bank of Spain), Estonia, Finland, France, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands and Portugal.

Structure of the Eurosystem

The Eurosystem does not have its own governing bodies but is managed by the governing bodies of the European Central Bank:

  • Government council
  • Executive committee
  • General advice