lecture 7 The Euro, success and failure Flashcards
what can exchange rates lead to?
could lead to crisis and inflation and eventually to wars and political issues
what is the Bretton Woods System?
US government linked the US exchange rate to gold standard because it was stable and this way floatation wouldn’t go too wild
when did the Bretton woods system collapse?
in 1971 US left the BWS
why did the US leave BWS in 1971?
Because of the Nixon Shock us couldn’t keep up with the gold standard because of the
international turmoil crisis and the Vietnam war
what did the CSC do to keep their exchange rate stable after BWS?
they use the Snake in the tunnel solution (1972/74)
what kind of step can the Snake in the Tunnel be perceived as?
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.
what was founded in 1979
European Monetary Systems (EMS) + Exchange Rate Mechanism (ERM
what was the purpose of the EMS and the ERM?
It is mechanism that wold tied the exchange rates of the European states to each other
what did the EU ask in 1988 to Delors?
asked EMU plan (euro plan) and it contained 3 stage plan
what did the Delors plan contain?
it contained criterial MS need to meet to enter the Monterey Union
what needed to be met in Delors from 1990-94
removal of last barrier to free movement of capital and independence of CB
what needed to be met in Delors from 1994-98
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
what need to be met in Delors from 1999-onwards?
have permanent fixing and exchange rate, creation of ECB and stability and Growth pact
what does the European Council do for economic integration?
Sets broad direction of EMU and takes decisions during crises
what does the EC do for economic integration?
Propose EMU legislation and assess and monitor member states taxation and spending
what does th Court of Justice of the European Union do for economic integration?
Fines state breaching deficit/debt rules
what does the EcoFin council do for economic integration?
Coordinate and monitor economic policy, budgets and spending
what does the EP do for economic integration?
ECB President is supervised
EP co-legislate on economic governance
what does the European Investment Bank do for economic integration?
Fund projects
what are the Eurozone actors?
institutions that are entirely focused on monitoring because finical concepts decisions need to be made fast and efficient
what does the • European System of Central Banks (ESCB) do as an Eurozone actor?
Framework for ECB: Objective is to ‘maintain price stability’
what does the Euro Area Summit do as an Eurozone actor?
Oversee policy and developments
what does the European Central Bank (ECB) do as an Eurozone actor?
ECB manages monetary policy on behalf of member states
Independent from member state governments
what does the Euro Group do
as an Eurozone actor?
oversee EMU and Fiscal Compact
Prepare Euro Area Summits
what does the European Stability Mechanism do
as an Eurozone actor?
Loans to Eurozone countries and bank
where was Protocol on the EuroGroup founded and what do they do?
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
what crisis happened from 2008 onwards
Global finical crisis, European Economic problems, Eurocrisis ( sovereign debt crisis)
what was the main causes of the eurocrisis
it was the consequence of imposing a single currency on a very heterogeneous group of countries
