I. Introduction
According to Lane (2006), the European Monetary Union (EMU) began on the year 1999. Following his line of analysis and reasoning, this paper shall seek to analyze the purported impacts of the said action in the light of their inflation rates and the proportion of their portfolio holdings allocated to the other members of the Euro-zone. Furthermore, the author of this paper shall look qualitatively in the current Asian context to examine the relevance of a monetary union in the continent. Further, this study is limited to the following European countries:
1. Belgium
2. Germany
3. Ireland
4. Greece
5. Spain
6. France
7. Italy
8. Luxembourg
9. Netherlands
10. Austria
11. Portugal
12. Finland
II. The Impact of the Maastricht Treaty to Inflation Rates (2008- 2013)
According to Lane, the Maastricht Treaty of 1992 was adopted to ensure a sufficient degree of monetary convergence among the members of the EMU (2006). According to Eurostat, the Maastricht Treaty is defined as follows:
“The convergence criteria, sometimes also called Maastricht criteria, are conditions that Member States of the European Union must fulfil to join in economic and monetary union and to use the euro as official currency” (http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Glossary:Maastricht_criteria)
The said criteria required the countries who want to use Euro as their official currency to meet the following criteria, among others (Lane, 2006):
1. Have an inflation rate no higher than 1. 5 percentage points than the three best performing members states a year before the inspection, and;
2. To limit their budget deficit to no more than 3% of their GDP, and to accumulate public debt not greater than the 60% of their GDP.
With t...
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The European Union has been helped economically ever since World War II. Right after World War II’s end, Europe was struggling to hold on. The countries of the modern-day European Union thought it would be a good idea to come together and help each others struggling economy. To this day, this decision has had a very positive outcome on the EU’s economy. As shown in Diagram 1, the European Union combined together has the world’s highest GDP at 18.3 Trillion USD as compared to the United States’ 17.4 Trillion USD GDP and China’s 10.4 Trillion USD GDP. The idea
The European Union today is a political and economic entity that controls in a single market located mostly in Europe exploiting Euro as a single currency uniting the vast majority of its members. The market that all European Union members share provides free trade of goods and services as well as a common external tariff. One might argue that the European Union would not perceptible its current influence had it not been for the introduction of the Euro. Speaking of the benefits of the Euro, one can name the elimination of exchange rate problems, creation of a single financial market, providing price stability, low interest rates as well as being a political symbol of unity and commitment to the Union. Today, Euro is the second reserve currency in the entire world - a fact that clearly speaks for itself of its value in the global market.
Many people would agree that Europe is a continent in which regions identify with each other even if they are not part of the same country. For that reason, as well as others, in 1957 the Treaty of Rome "declared a common European market as a European objective with the aim of increasing economic prosperity and contributing to 'an ever closer union among the peoples of Europe'" (www.euro.ecb.int). Later, in 1986 and then in 1992, the Single European Act and the Treaty of European Union tried to build on the previous treaty to create a system in Europe in which one currency could eventually be used all over the land under the heading of the Economic and Monetary Union. (www.euro.ecb.int) However, the question remains, why would the leaders of various European nations want to create one currency when the rights of national sovereignty have always been an issue for countries all over the world. Why, in 1998 did they create the European Central Bank, and why in "The third stage of EMU... on 1 January 1999, when the exchange rates of the participating currencies were irrevocably set" (www.euro.ecb.int) did eleven, and later twelve, countries link themselves economically in a way that has never been done before?
To start with, what is the meaning of the Single Market? According to European Commission website, Single Market indicates the EU as one territory that has no internal borders or any other controlling complications that lead to the free movement of booth services and goods (The European Single Market - European Commission, 2017). According to the same source, single market has great benefits. It encourages competition and trade, increases efficiency, promotes quality, as well as helps in cutting the prices. In addition, the same source considers the European Single Market as one of the EU’s ultimate accomplishments that powered the economic growth and made the everyday life of European businesses and consumers easier (The European Single Market - European Commission, 2017).
Under the Maastricht Treaty, one body will govern and regulate both. economic and political concerns , he said. I find it hard to comprehend how one governing body can do the work of twelve individual governments in a continent whose culture and society are so diverse. If the nations now are incapable of settling their internal problems, how can they shift the immense burden to a smaller, less experienced group do anything but further.
To most people in the United States hearing the word Euro brings about blank stares. Ask this same question in England or another European country and it means bringing Europe together under one common currency. The Euro can be defined as the common monetary system by which the participating members of the European Community will trade. Eleven countries Germany, France, Spain, Portugal, Ireland, Austria, the Netherlands, Belgium, Luxembourg, Finland and Italy will comprise the European Economic Monetary Union that will set a side their national currency and adopt the Euro in 2002. A new National bank, based in Frankfurt Germany, will be constructed and the interest rates that control the economies of these nations will be in the hands of this new system. It is indeed a great experiment, being masterminded in Frankfurt, one that will be felt through out Europe as well as the rest of the world.1
... to gain more money allowing the government to be able to reduce indebtedness levels.
Companies. Retrieved July 4, 2008, from University of Phoenix, MMPBL-501 Web site. University of Phoenix . ( 2008). Economics for Managerial Decision Making
The recent global financial crisis that affected not only America but also Europe and other parts of the world resulted in massive unemployment. This is due to the high costs of operation that many corporations faced forcing them to cut on labor costs. There is need for European government interventions to avert this social crisis and prevent the occurrence of such a crisis in future. Unemployment has hit the service sector harder than other sectors with the following being the most affected: automotive, construction, tourism, finance and real estate. The global financial crisis has also increased consumer prices thus pushing inflation. According to McCathie, “the increase in July consumer prices to 1.7 per cent pushed inflation in the currency bloc up towards the European Central Bank’s target of keeping inflation at below, but close to 2 per cent. Eurozone consumer prices had stood at 1.4 per cent in June” (McCathie, 2010).
The end of the World War II marked the beginning of a new era for the world economy. The Bretton Woods System refers to an agreement made at an international conference between 44 nations in 1944 at Bretton Woods, New Hampshire, United States of America (hereby U.S.) on the 22nd of July 1944. It was aimed at maintaining stability in the monetary system in the post World War II period. “In an effort to free international trade and fund postwar reconstruction the member states agreed to fix their exchange rates by tying their currencies to the U.S. dollar.” The fundamental of this system was liberalizing trade policy and promoting free trade. The U.S. dollar was linked to gold as a show of its dependability in the eyes of the rest of the world, $35 equaled 1 ounce of gold. They followed an adjustable fixed exchange rate (1% band). It set up the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which is a part of the World Bank today. Member nations monetary contributions to the setting up of these institutes determined their number of votes as well as their economic prowess
The inflation rate of Thailand was the lowest during 1998. From 1997 to 1998, to solve the Asian financi...
In order to be a member of the European Union, an applying nation must first meet the requirements of membership as described in the Copenhagen Criteria. There are geographic, democratic and economic criteria. Geographically, the applying nation must be classified as a European nation, as exemplified by Morocco’s rejection. The applying nation must also have a secure and functional democratic government that only acts in accordance with the law. This means that any citizen should be able participate in the political system and that there are free elections with a secret ballot. The government must also respect human rights and have protection policies for minorities, meaning that a persons’ inalienable rights are protected by law and minority groups can retain their culture and language without discrimination. Economically, a country must have a functional market economy on which it can feasibly support itself and other member nations if need be. The country’s economy needs to be able to compete on a global scale and deal with economic pressures. There are also separate guidelines for countries wanting to convert to the Euro. Finally, countries that want to join must agree to uphold laws and regulations t...
Ritter, Lawrence R., Silber, William L., Udell, Gregory F. 2000, Money, banking, and Financial Markets, 10th edn, USA.
As a result of those huge economic and social issues resulting from Eurozone crisis, finding a solution to the currency problem become an urgent as well as a crucial task of the member countries. In order to fix this problem, there were many different proposals submitted by all parties concerned. Policy implementations taken by the European Central Bank have had some powerful impacts on the economy of the union, and therefore the idea concerning a separation within the union has almost disappeared. However, to be able to find an effective and permanent solution it is needed to focus on long term fiscal and monetary policies.[1]
In my opinion, the most important aspect is that government should consider the importance of the government macroeconomic objectives goals and which government should priority first. This will be an easier way for government to allocate the resources and help to focus the government macroeconomic objectives