"There is no question the Federal Reserve provides a model of sorts for the ECB," Richmond Fed director of research Marvin Goodfriend said.

Goodfriend was commenting on the European System of Central Banks (ESCB) which shares a similar structure with the Fed, including an executive board at the ECB and eleven national central banks, much like the 12 Fed district banks.

But Goodfriend also pointed that, when it comes to voting on monetary policy, the ESCB and the Fed differ markedly.

The seven Fed governors always vote while the 12 Fed bank presidents, except for New York, vote on a rotating basis. This means the governors will always have a greater say than the presidents.

In the ESCB, the six members of the executive Board -- the equivalent of the Fed governors -- vote, as dothe 11 national central bank governors. Their views, therefore, could outnumber that of the Board's by almost 2-to-1.

"Federal Reserve history teaches that a decentralised system needs a strong centre," said Goodfriend, who authored a paper on federal central banking systems. "The board of governors exercises a lot more power in the Federal Reserve system than does the ECB in the ESCB."

The ECB's mandate is solely geared at fighting inflation, unlike the broader Fed goals that call for both price stability and maximum sustainable growth.

But the need to generate more economic growth may lead some European nations to lean on the central bank governors to seek a more stimulative monetary policy.

"We have before us a new enemy, which is not only the increase in unemployment but also the contraction of employment," Bank of Italy governor Antonio Fazio said last week in the latest sign that economic growth rather than the fight against inflation will be European politicians' key priority in1999.

"Monetary Union implies some sort of political bargaining over monetary policy that eventually will need to be resolved through some sort of European political process," Stanford University professor of economics Romain Wacziarg said, while pointing out Europe lacks a unified political structure.

"The lack of a true federal fiscal structure will increase the likelihood of conflict over monetary policy," Wacziarg said of the difficulties of conducting a monetary policy that would represent the different interests of 11 sovereign nations.

Wacziarg co-authored with Harvard University professor of economics Alberto Alesina a paper entitled "Is Europe going too far?" that details the uncertainty about conducting monetary policy in an environment of multiple political powers.

Wacziarg cautioned that fiscal restraint under the stability pact may lead a cash-strapped country to try to influence ESCB policy, "expanding the area of disagreement from the fiscal to the monetary arena."

"Europe stands at acrossroads in terms of institutional design," Wacziarg also said.

Another important function of central banking is the banking supervisory and regulatory role such as the Fed has. The ECB, because it is not the central bank of any country, will not have any of these responsibilities at first.

"There is some virtue in having some of the banks' supervisory and regulatory functions with central banks," said former Federal Reserve vice chairman Alan Blinder of the lenders of last resort in times of banking or financial crisis.

"At the very least, the central bank should have very good information about what is going on with bank supervision. That's a minimum requirement and the ECB would want that. But it's one of the unresolved issues in the Maastricht Treaty," added Blinder, who also heads an international think-tank, the Group of Seven.

"I would not be surprised if some years from now, there is one single European bank supervisory body," Blinder said.