The executive board of the new European Central Bank met this week for the first time and the full board including Ireland's current governor of the Central Bank, Mr Maurice O'Connell will gather next week for its inaugural meeting. The bank has important decisions to make on how it will run monetary policy including what statistics will be used to judge inflationary pressures across the EU.

But the informal discussions among the governors is likely to be more interesting than the initial formal decisions on important but technical issues such as which measures of money supply to pay attention to. This is because they will all realise by now that setting interest rates for the euro area will be no easy task. Borrowing costs are low in the core continental economies because inflationary pressures are muted and growth is modest.

But in peripheral economies such as Ireland, Finland and Spain growth is much stronger and inflationary pressures are more threatening. Higher interest rates would be more appropriate for these economies, but pressure will soon come for rates to start falling towards German and French levels.

Ideally, the peripheral economies will hope that German rates might edge upwards later this year, allowing rates in the eurozone to converge at a somewhat higher level by next January. But even if the Bundesbank does push up rates it will not be by much and when the new ECB takes command next January, it is likely to pay more heed to economic conditions in the big continental economies when deciding on rate levels.