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HOW THE EUROPEAN SINGLE CURRENCY EVOLVED

HOW THE EUROPEAN SINGLE CURRENCY EVOLVED. By Adam Dangelmayr & Ibrahim Kekec. REASONS BEHIND THE MONETARY COOPERATION. To enhance the Europe’s role in the world monetary system. To turn the European Union into a truly unified market. European Monetary System (EMS) 1979-1998.

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HOW THE EUROPEAN SINGLE CURRENCY EVOLVED

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  1. HOW THE EUROPEAN SINGLE CURRENCY EVOLVED By Adam Dangelmayr & Ibrahim Kekec

  2. REASONS BEHIND THE MONETARY COOPERATION • To enhance the Europe’s role in the world monetary system. • To turn the European Union into a truly unified market.

  3. European Monetary System (EMS) 1979-1998 • Capital control through fixed exchange rates • German Monetary Dominance & the Credibility Theory of the EMS • Stability through fixed exchange rates • Discouraged inflation

  4. The Maastricht Treaty in 1991 • The beginning of the European Economic and Monetary Union (EEMU) • Why important • Greater degree of market integration • The end of German dominance and macro policies • A cushion to speculative attacks • Historical reasons

  5. The Euro “1992” Initiative • Market liberalization • Free flow of goods & services, and factors of production Microeconomic efficiency and macroeconomic stability

  6. The Euro Zone • The Maastricht Convergence Criteria • Inflation rate no more than 1.5 percent • Stable EXRT • Public deficit no more than 3 percent of the country’s GDP • Public debt below 60 percent of its GDP • Ongoing monitoring of criteria 3 and 4

  7. Stability and Growth Pact • A cushion against inflationary pressures • Set budgetary objectives stopping excessive public debt and deficits The European Central Bank (ECB) • Headquartered in Frankfurt plus 15 other national banks • The governing council • 6 ECB members and heads of national central banks • Price stability with supreme privileges • Above the European Parliament

  8. The Revised EXRT Mechanism • A tool to keep the target of low inflation • Discourages the competitive devaluations against the Euro by the union countries that are not a part of EMS • One of the conditions in the Maastricht Treaty

  9. THANK YOU

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