With just six months to go before #-Day - the launch of euro notes and coins - the face of Mr Euro was revealed to the public yesterday. At a press conference in Brussels, Belgium's Mr Didier Reynders, who chairs the euro group of finance ministers, unveiled a screen showing an animated euro coin.

The image turned around to show a smiling yellow face surrounded by 12 stars representing the 12 countries participating in the euro.

"My role is to personify the euro at the main events linked to the introduction of the euro notes and coins," Mr Euro said. Then he repeated the message in a number of different languages.

It is cheering to know that somebody connected with the euro is smiling because at the European Central Bank's headquarters in Frankfurt, there is little to be happy about.

The launch of notes and coins is itself a logistical challenge of enormous dimensions. Aside from the task of informing 300 million Europeans about the changeover and familiarising them with the new notes and coins, #-Day is fraught with security dangers.

In Belgium, January sales have been postponed until the end of the month to limit the huge amounts of cash that will be in circulation. Elsewhere, governments are considering bringing in the army to protect transports of cash.

For ECB officials in Frankfurt's gleaming Eurotower, however, the perils of #-Day are still distant enough. The same cannot be said for the currency's continued weakness on foreign exchange markets and the ECB's lack of credibility as an institution the markets can depend upon.

The ECB's mandate is set out in the Maastricht Treaty agreed in 1992:

"The primary objective...shall be to maintain price stability. Without prejudice to the objective of price stability, it shall support the general economic policies in the Community."

The treaty identifies a number of objectives for the EU, including the promotion of non-inflationary economic growth and a high level of employment and social protection. But as the ECB president, Mr Wim Duisenberg, has pointed out time and again, keeping down inflation is the bank's priority.

The ECB can influence the economy by raising or lowering interest rates. Cutting rates, which makes borrowing cheaper, can boost economic growth but risks fuelling price rises. Increasing rates can dampen inflation but risks choking economic recovery.

The bank's governing council, made up of central bank governors from the 12 eurozone states and a six-person executive, meets every two weeks to decide monetary policy. The ECB's chief economist, Mr Otmar Issing, presents a report that usually includes a recommendation on whether interest rates should rise, fall or stay the same. Other members of the governing council may contribute to the debate but decisions are usually taken by consensus rather than by voting.

At present, the ECB faces one of its most difficult dilemmas since the euro was launched in 1999. Euro-zone inflation is running at 3.4 per cent, almost double the ECB's target ceiling of 2 per cent. But economic growth is slowing, particularly in Germany, which accounts for one-third of the euro-zone's GDP.

Many economists want the ECB to follow the lead of the US Federal Reserve Bank by cutting interest rates aggressively. But the governing council has apparently concluded that the risk of fuelling inflation outweighs the danger that Europe could slide into recession.

One factor that is fuelling inflation is the euro's enduring weakness against the dollar, despite the fact that euro-zone growth is outpacing the US. Analysts are divided over the cause of this weakness but many blame the ECB itself, an institution that has failed to develop a reputation for predictability, the quality most cherished by the markets.

The decision last month to cut interest rates by a quarter of one per cent should have been welcomed by the markets. But the fact that it followed a number of statements by ECB officials ruling out such a move caused further confusion about the bank's priorities.

Mr Duisenberg's reputation has yet to recover from an error of judgment last year when he blurted out in an interview details of the ECB's strategy for intervening in the markets to boost the euro's exchange rate.

Uncertainty over the ECB's future has further undermined his credibility and speculation about his imminent resignation surfaces in European newspapers every few weeks.

Officially, Mr Duisenberg's term in office runs until 2006, but some mystery surrounds the circumstances in which he was appointed. On the night of May 2nd, 1998, the French President, Mr Jacques Chirac, withdrew his demand that the first ECB president should be a Frenchman.

Mr Chirac claimed later that Mr Duisenberg had agreed to step down half-way through his term, on May 31st, 2002 at the latest.

"That is the agreement and Mr Duisenberg, who is an honourable man, gave his word on it. I have no doubt about it," Mr Chirac said in June 1998.

Mr Duisenberg has denied that any such pact was ever agreed, although he has indicated that, at 62, he is unlikely to serve a full term. But he insists that he will leave at a moment of his own choosing.

Until recently, the governor of the Banque de France, Mr Jean Claude Trichet, was regarded as Mr Duisenberg's certain successor. But Mr Trichet faces accusations of involvement in a financial scandal and he may not be able to establish his innocence until after the ECB president steps down.

In recent weeks, Luxembourg's Prime Minister, Mr Jean Claude Juncker, has emerged as a possible successor. Mr Juncker, who also serves as his country's Finance Minister, is the central bankers' favourite politician.

As a veteran of the European political scene, he may also be less prone to the gaffes that have plagued Mr Duisenberg's tenure so far.