EMU (class 15) Flashcards
What is the Single Monetary Policy guided by?
The European Central Bank
Where is the European Central Bank located?
Germany Frankfreingt (Germany had been the strongest economy and best run) 1st leader was from Poland
what is the single currency?
the Euro
What happened between 1969-1991?
From Hague to Maastricht, should explore the possibilities of creating an economic and monetary union
Why did the plan presented in 1970 fail?
because the countries had different opinions and international circumstances. disagreed on how to get there and what it would look like and Bretton Woods collapsed and created problems (international)
when did EMU relaunch and why?
1980s and needed to find a way to stabilize currencies. came up with the artificial currency ECU (to stabilize currencies) worked, and that was part of the success
when was the EMU program and with what treaty?
1991 with the Maastricht treaty
Explain from treaty to reality (1992-2002)
a) ratification process
b) 1992-1993 Exchange rate mechanism crisis (ERM) too many fluctuations in exchange rates
c) convergence criteria (criteria for adapting to the Euro (economic and monetary union) (only one had complied with all the criteria)
d) 12 countries joined the EMU from 2002
how is the Euro managed?
monetary policy for Eurozone members is controlled at the European level (the main role of central bank is to maintain price stability by controlling interest ranks)
national governments control other economic policy areas, which include…
a. fiscal policy that concerns government budgets
b. tax policies that determine how income is raised
c. structural policies that determine pension systems, labor – and capital–market regulations
what is a fiscal compact treaty?
treaty on stability, coordination, and governance
what does a fiscal compact treaty do?
- “balanced budget rule” to be incorporated into national legal systems, at the constitutional level or equivalent
- if you violate that rule, ECJ checks whether nations implement budget rule properly (fines up to 0,1% of GDP if they fail to do so)
where is the Euro least popular?
Denmark and Sweden
what are the positive effects of EMU?
elimination of transaction costs (easier)
seen as strengthening the single market
what are the critics of EMU?
unnecessary (Denmark)
undemocratic (country can deal with it itself)
