Policy alternatives for the relationship between ECB monetary and financial policies and new member states

The global financial crisis has cast doubt on existing within the mainstream economics consensus on monetary policy. So called ‘New Consensus Monetary Policy’ appeared to lack many important operational, political and institutional issues, especially with regard to consistency of the monetary-fiscal policy mix within the eurozone, as well as with reference to policy mix in the individual member countries. When crisis emerged, problems with monetary- fiscal coordination turned to be more complicated. The crisis has proved also inefficiency of the “one size fits all” monetary policy, implemented by the ECB. The divergences of economic performance, business cycles, and financial development – all attending the financialisation process – have become eye striking among the EMU members. Extremely low inflation rates have brought new challenges into focus resulting i.a. from the zero bound on nominal short-term interest rates. Taking this into consideration, the aim of this paper is to investigate the ways in which the monetary and financial policies of the ECB can be conducted in a low interest rates environment. Undertaken analysis allows understanding the strengths and weaknesses of these policies. It also creates a background for formulating alternative policy proposals aimed at dealing with divergence and disparities between EU member countries