1. ECONOMIC AND MONETARY POLICY ES3001 WEEK 15

2. Myth or Fact?
... nobody likes the euro – everyone wants their old national currencies back ... 
... the euro is fine for multinationals, but it doesn’t help people get jobs ... 
... countries that have stayed outside the euro area have done better ... 

3. Myth or Fact?
... countries in the euro area have to bear the cost of other members' liabilities ... 
... everything is more expensive since the euro arrived ... 
... the rules for economic surveillance in the euro area aren't applied fairly and equally to all countries ... 

4. The convergence criteria
an annual government deficit no higher than 3% of GDP
a government debt lower than 60% of GDP
Inflation: <1.5% above the average of the best 3
Interest rate: < 2% higher than average of best 3 states or the euro

5. Pros and Cons of the Euro
Advantages???
no transaction cost
price transparency
more stable than the national currencies
provides greater confidence for exporters and importers (McCormick 2002)
international credibility competing with the US dollar (McCormick 2002)
enable vulnerable member states to have more stability (Lintner 2001)

6. Pros and Cons of the Euro
Challenges???
Fixed fiscal policy for all members: “The members of the euro zone will have to sink or swim together” (Lintner 2001:324)
No independent exchange rate mechanism (Hix 2005)
Might increase regional economic disparities (Lintner 2001: 324 and Barnes&Barnes 1995)

7. Challenges of EMU
Strong measures against inflation by pressuring the value of currency might undermine the ability of states to protect employment at the expense of higher inflation (George&Bache, 2001)
Difficulties of compliance with the convergence criteria
Challenge to national economic sovereignty

8. EMU What are the visible and hidden faces of Euro? (Jabko 2010)
How important is European Central Bank for the EMU?

9. EMU
Has EMU triggered/increased political integration? (Hodson 2009; Issing 2000)
What role does EMU play in the European integration?
Did the Euro manage to create/contribute to the creation of European identity? (Risse 2003)

10. EURO CRISIS Who is to blame?
How to respond to Euro-crisis? From supranationalist or intergovernmentalist perspective?
Has the Euro been a success despite the crisis?