MONETARY POLICY –THE EURO

Where was the origin of the EURO policy and the objectives?

Origins:

• Maastricht Treaty

Objectives:

• Symbol for unified Europe

• Sense of European identity

• Economic growth

• Rival the dollar

What were the obstacles of the EURO policy?

• Strong nationalism among some countries

• German relcutance- they had the strongest economy and didn’t want to be dragged by the other economies

What are the accomplishments of the European policy?

• German Unification

• Maastricht Treaty and the convergence criteria

Explain the Maastricht Treaty and the convergence criteria?

• National budget deficit less 3% GDP

• Public debt less than 60% GDP

• Inflation within 1.5% average

• Interest rates within 2% average

• Keeping exchange rates stable

Assessment of EURO policy?

• Techinal: success

• Economic: mixed, mostly failure

  • Positive: reduced transactions costs

  • Negative: persistent fiscalm debt issues

    • —> emphasis on austerity

• Societal: limited success

  • Some impact on youbger Europeans

  • But eight EU countries are still outside euro zone

• Geopolitical: mostly failure

  • Dollar is still supreme