lecture 7 The Euro, success and failure

Question 1

what can exchange rates lead to?

Answer 1

could lead to crisis and inflation and eventually to wars and political issues

Question 2

what is the Bretton Woods System?

Answer 2

US government linked the US exchange rate to gold standard because it was stable and this way floatation wouldn’t go too wild

Question 3

when did the Bretton woods system collapse?

Answer 3

in 1971 US left the BWS

Question 4

why did the US leave BWS in 1971?

Answer 4

Because of the Nixon Shock us couldn’t keep up with the gold standard because of the
international turmoil crisis and the Vietnam war

Question 5

what did the CSC do to keep their exchange rate stable after BWS?

Answer 5

they use the Snake in the tunnel solution (1972/74)

Question 6

what kind of step can the Snake in the Tunnel be perceived as?

Answer 6

it can perceived as the first step of European Monetary System MS tied their economies together to make sure that there would be a functioning single market.

Question 7

what was founded in 1979

Answer 7

European Monetary Systems (EMS) + Exchange Rate Mechanism (ERM

Question 8

what was the purpose of the EMS and the ERM?

Answer 8

It is mechanism that wold tied the exchange rates of the European states to each other

Question 9

what did the EU ask in 1988 to Delors?

Answer 9

asked EMU plan (euro plan) and it contained 3 stage plan

Question 10

what did the Delors plan contain?

Answer 10

it contained criterial MS need to meet to enter the Monterey Union

Question 11

what needed to be met in Delors from 1990-94

Answer 11

removal of last barrier to free movement of capital and independence of CB

Question 12

what needed to be met in Delors from 1994-98

Answer 12

the European Monetory Institute should be established (fiscal rules), convergence criteria and governed finance should be met. stable, inflation, exchange rate and stable Lon-term interest rates

Question 13

what need to be met in Delors from 1999-onwards?

Answer 13

have permanent fixing and exchange rate, creation of ECB and stability and Growth pact

Question 14

what does the European Council do for economic integration?

Answer 14

Sets broad direction of EMU and takes decisions during crises

Question 15

what does the EC do for economic integration?

Answer 15

Propose EMU legislation and assess and monitor member states taxation and spending

Question 16

what does th Court of Justice of the European Union do for economic integration?

Answer 16

Fines state breaching deficit/debt rules

Question 17

what does the EcoFin council do for economic integration?

Answer 17

Coordinate and monitor economic policy, budgets and spending

Question 18

what does the EP do for economic integration?

Answer 18

ECB President is supervised

EP co-legislate on economic governance

Question 19

what does the European Investment Bank do for economic integration?

Answer 19

Fund projects

Question 20

what are the Eurozone actors?

Answer 20

institutions that are entirely focused on monitoring because finical concepts decisions need to be made fast and efficient

Question 21

what does the • European System of Central Banks (ESCB) do as an Eurozone actor?

Answer 21

Framework for ECB: Objective is to ‘maintain price stability’

Question 22

what does the Euro Area Summit do as an Eurozone actor?

Answer 22

Oversee policy and developments

Question 23

what does the European Central Bank (ECB) do as an Eurozone actor?

Answer 23

ECB manages monetary policy on behalf of member states

Independent from member state governments

Question 24

what does the Euro Group do

as an Eurozone actor?

Answer 24

oversee EMU and Fiscal Compact

Prepare Euro Area Summits

Question 25

what does the European Stability Mechanism do

as an Eurozone actor?

Answer 25

Loans to Eurozone countries and bank

Question 26

where was Protocol on the EuroGroup founded and what do they do?

Answer 26

in the ToL and have been very effective since the Euro crisis, recognised but has no legal status and they can act quite fast because the council of the euro area are here

Question 27

what crisis happened from 2008 onwards

Answer 27

Global finical crisis, European Economic problems, Eurocrisis ( sovereign debt crisis)

Question 28

what was the main causes of the eurocrisis

Answer 28

it was the consequence of imposing a single currency on a very heterogeneous group of countries