How is the policy of the European Central Bank determined if every country has a different economic situation?

Question

How is the policy of the European Central Bank determined if every country has a different economic situation? Is there a sort of weighing system that makes the economic situation of certain European economies more important than others? Is there some kind of guideline on this, or is the bank given the permission to do whatever it pleases?

Answer 1

From Wikipedia:

The primary objective of the ECB, mandated in Article 2 of the Statute of the ECB, is to maintain price stability within the Eurozone.

Contrast this with the United States Federal Reserve, which is supposed to maintain both price and employment stability.

The main point being that European Central Bank is not required to take into account the differing economic situations of the countries within it except as those situations might impact price stability (inflation). In practice, the ECB targets an inflation rate of below 2%. If inflation goes above 2%, it failed. If inflation goes below 0% it failed. If inflation is around 1.75%, it is successful. An inflation rate of 1% would be kind of meh, neither failure nor success.

Inflation is calculated on a Eurozone-wide basis. While it is possible for inflation to be higher or lower in a particular area, that is not of major concern to the ECB. Their primary objective is the inflation rate of the Euro overall.