Introduction to the European Union - Economic, Monetary and Fiscal Policy (Video)

Vocabulary flashcards covering key terms, concepts, and institutions from the EU economics, monetary policy, and fiscal policy lecture.

EC (European Community)

The EU’s original economic/political entity focused on peace among member states and the creation of a customs union, later expanding into the single market and beyond.

EU (European Union)

Political and economic union evolving from the EC, aiming for deeper integration and common policies across member states.

Single Market

The EU’s integrated market intended to remove barriers to trade and allow the free movement of goods, services, capital, and people.

Internal Market

Another term for the Single Market; emphasizes regulatory integration across the EU’s territory.

Common Market

Historic term for the integrated market; often used interchangeably with the Single/Internal Market.

Single European Act (1986)

Treaty aiming to establish the single market by 1992.

Non-tariff barriers

Trade barriers other than tariffs, such as subsidies, standards, regulations, and quotas that impede trade.

State aids

Subsidies or support from a member state government to firms or sectors that distort competition.

VAT (Value-Added Tax)

Indirect tax applied on goods and services; rates differ across member states.

Excise duties

Taxes on specific goods (e.g., alcohol, tobacco) with varying rates.

Four Freedoms

Free movement of goods, persons, services, and capital within the EU.

Free movement of goods

No tariffs or non-tariff barriers hindering cross-border goods trade.

Free movement of persons

Right to live, work, and move across member states; includes workers and establishment.

Free movement of services

Right to offer and receive services across borders within the EU.

Free movement of capital

Right to invest and move money freely across borders.

Maastricht Treaty (1992)

Treaty establishing the Economic and Monetary Union (EMU) and the European Central Bank (ECB).

Convergence criteria

Conditions to join the euro: price stability, sound public finances, exchange-rate stability, long-term interest rates, plus legal alignment.

Price stability criterion

Inflation no more than 1.5 percentage points above the rate of the best-performing member states.

Budget deficit criterion

General government deficit not exceeding 3% of GDP.

Debt criterion

Government debt not higher than 60% of GDP.

Exchange-rate stability criterion

Participation in ERM II for at least two years with no significant deviations.

Long-term interest rate criterion

Convergence of long-term interest rates to near those of best-performing states.

Legal convergence criterion

Alignment of national legislation, especially central banking law, with EU law.

ECB (European Central Bank)

Central bank for the euro area; sets monetary policy and maintains price stability, with independence.

EMU (Economic and Monetary Union)

Framework combining a single currency (the euro) with a common monetary policy and related institutions.

Euro

European currency introduced in 1999 (coins/notes from 2002) used by eurozone countries.

Eurozone

EU member states that have adopted the euro and share a common monetary policy.

Opt-out

Exemption from euro adoption (e.g., the UK); some countries joined later or retained flexibility.

Stability and Growth Pact (SGP)

1997 rules to ensure fiscal discipline: limits on deficits and public debt.

ECOFIN Council

EU Finance Ministers’ Council responsible for economic and financial policy coordination.

Eurogroup

Informal group of euro-area finance ministers; formalized by the Lisbon Treaty; oversees EMU fiscal aspects.

OCA (Optimum Currency Area)

Theory on when countries should share a single currency, considering economic integration and shock-sharing mechanisms.

Intergovernmentalists

Approach arguing that integration follows national interests and bargaining among states.

Neofunctionalists

Approach arguing that supranational actors (e.g., the Commission) drive integration via spillover.

Commission as policy entrepreneur

Idea that the European Commission shapes the agenda and drives deeper integration.

Rules of origin

Documentation proving where a product was produced to qualify for tariff preferences.

Quotas

Quantitative limits on the amount of a product that can be imported.

Regulations (as non-tariff barriers)

Rules governing how a product is manufactured, handled, or advertised, affecting trade.

ERM II

Exchange Rate Mechanism II; a two-year (minimum) test to ensure exchange-rate stability before euro adoption.

Monetary policy independence

ECB’s ability to set policy, manage inflation, and control money supply free from political interference.

Convergence criteria (summary)

Economic conditions (inflation, deficits, debt, exchange rates, interest rates) that must be met to join the euro.