6b: Euro Crisis

Question 1

Maastricht Criteria

Answer 1

Question 2

Problems with the Maastricht Criteria

Answer 2

Economic Issues:

• 3% deficit is an artificial number
• Better suggestion: Cyclically adjusted deficit
• “Toothless Tiger” : No sanctions
• Debt would a better measure than deficit, however 60% seem unrealistic

Political Issues:

• Sanctioning undermines process of integration
• Tax issues are always in the hands of elected governments, which is not the case for European Institutions
• Contradiction: International pressure tries to avoid a debt bias – the budget however is firmly viewed as a sovereign prerogative

Question 3

Divergence from SGP

Answer 3

Debt Limit
The debt limits have been ignored for the last 12 years by various member states

No Bailout Clause
Weakening of the No-Bailout clause which excludes the EU from liability for individual member states

Financial Assistance of the ECB
According to the Maastricht Treaty, the ECB has to refrain from buying up bonds, so as to guarantee an independent institution

Question 4

EFSF

Answer 4

Question 5

Greece: Haircut

Answer 5

Question 6

Greece: Leaving the Euro

Answer 6

Question 7

Greece: Euro Division

Answer 7