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Welcome to Johnbirchall-economist.com!
(
EU Fact sheet 6)


  The single currency (Euro)

 

The history of the Single Currency

 

EMU STORY

 

The idea of an economic and monetary union in Europe started well before the Treaties establishing the European Communities after the Second World War (for example, already in the League of Nations, Gustav Stresemann asked in 1929 for a European currency against the background of an increased economic division due to a number of new nation states in Europe after the Treaty of Versailles. (Historical documentation of EMU)

 

How the Euro evolved

 

Part 1: 1960 - 1969     The run-up to the Barre Plan

 

Part 2: 1969 - 1971      The first plans by stages to create an economic and monetary union

 

Part 3: 1971 - 1975      From the floating US-Dollar to the European Monetary System

 

Part 4: 1975 - 1980      The need to coordinate economic policies

 

Part 5: 1980 - 1988      The ECU in the centre of discussion

 

Part 6: 1988 - 1991      The run-up to the Maastricht Treaty

 

Part 7: 1992 - 1993      Work within the first phase of EMU

 

Part 8: 1994 - 1998      Work within the second phase of EMU

 

Part 9: 1999 - 2000      The start of the euro area ("EUR11")

 

Part 10: 2001 - 2002    The realisation of the third phase and enlargement of the euro area ("EUR12")

Other Resources

 

 

http://ec.europa.eu/economy_finance/emu_history/documents/Presentations/A%20single%20currency%20for%20Europe.ppt#1

 An excellent power point presentation on the reasons for the Euro and its role in EU expansion

http://ec.europa.eu/economy_finance/emu_history/documents/Presentations/The%20Euro%20and%20international%20aspects.ppt#13

An excellent power point presentation on the Euro and its international implications

 

http://www.ecb.eu/home/html/index.en.html - The European Central Bank

 

 

 

Introducing the Euro

Economic and monetary union (EMU) comprises various stages.

The main objective of Stage One, which began in 1990, was the complete liberalisation of capital movements under Article 56 of the EC Treaty.

 

In Stage Two, which began on 1 January 1994, the Member States implemented measures enabling them to achieve the convergence targets necessary in order to enter Stage Three of EMU and guaranteed the independence of their central banks. The process of coordinating economic policies and ensuring multilateral surveillance of progress with convergence began in the course of Stage Two. The Member States were called on to do all they could to avoid excessive public deficits.

 

In Stage Two the Member States had to take measures to free their central banks of political interference. Central banks are now responsible for monetary policy and, as such, determine interest rates in the euro zone. They were also prohibited from financing a budget deficit affecting the European institutions, the governments of the Member States or other authorities, be they regional or local, and from granting loans to state-owned companies.

 

Stage Three of EMU began on 1 January 1999 with the launch of the euro on financial markets. Under the accession treaty, the new Member States went straight into Stage Three of EMU on 1 May 2004.

 

What you must show before entering the Euro Zone

 

Price stability, measured according to the rate of inflation in the three best performing Member States;

Long-term interest rates close to the rates in the countries with the best inflation results;

An annual budget deficit which does not exceed 3% of gross domestic product (GDP) and total government debt which does not exceed 60% of GDP or which is falling steadily towards that figure;

Stability in the exchange rate of the national currency on exchange markets The exchange-rate mechanism of the European Monetary System requires this stability to be demonstrated and sustained for two years.

 

Some of the important data to consider when analysing the Euro and those who wish to join

 

New Member States Budget Deficits

New members

2000

2001

2002

2003

2004

2005

Cyprus

-2.4

-2.4

-4.6

-6.3

-4.6

-4.1

Estonia

-0.3

0.3

1.8

2.6

0.7

0.0

Hungary

-3.0

-4.4

-9.3

-5.9

-4.9

-4.3

Latvia

-2.7

-1.6

-2.7

-1.8

-2.2

-2.0

Lithuania

-2.6

-2.1

-1.4

-1.7

-2.8

-2.6

Malta

-6.5

-6.4

-5.7

-9.7

-5.9

-4.5

Poland

-1.8

-3.5

-3.6

-4.1

-6.0

-4.5

Czech Republic

-4.5

-6.4

-6.4

-12.9

-5.9

-5.1

Slovakia

-12.3

-6.0

-5.7

-3.6

-4.1

-3.9

Slovenia

-3.0

-2.7

-1.9

-1.8

-1.7

-1.8

New members

-3.2

-4.1

-4.9

-5.7

-5.0

-4.2

EU15

1.0*

-1.0

-2.0

-2.6

-2.6

-2.4

EU25

0.9*

-1.1

-2.1

-2.7

-2.7

-2.5

Euro zone

0.1*

-1.6

-2.3

-2.7

-2.7

-2.6

 

 

Applicant States Budget Deficits

 

Applicant countries

2000

2001

2002

2003

2004

2005

Bulgaria

-0.5

0.2

-0.8

-0.1

-0.7

-1.0

Romania

-4.4

-3.5

-2.0

-2.0

-3.0

-3.0

Turkey

-6.1

-29.8

-12.6

-8.8

-7.1

-6.0

 

Member States Government Deficits

 

New members

2000

2001

2002

2003

2004

2005

Cyprus

61.7

64.4

67.1

72.2

74.6

76.9

Estonia

5.0

4.7

5.7

5.8

5.4

5.3

Hungary

55.4

53.5

57.1

59.0

58.7

58.0

Latvia

13.9

16.2

15.5

15.6

16.0

16.1

Lithuania

24.3

23.4

22.8

21.9

22.8

23.2

Malta

57.1

61.8

61.7

72.0

73.9

75.9

Poland

36.6

36.7

41.2

45.4

49.1

50.3

Czech Republic

18.2

25.2

28.9

37.6

40.6

42.4

Slovakia

49.9

48.7

43.3

42.8

45.1

46.1

Slovenia

26.7

26.9

27.8

27.1

28.3

28.2

New members

36.4

38.5

39.4

42.2

44.4

45.2

EU15

64.0

63.2

62.5

64.0

64.2

64.2

EU25

62.9

62.1

61.5

63.1

63.4

63.4

Euro zone

70.4

69.4

69.2

70.4

70.9

70.9

 

 

Applicants States Government Deficits

 

Applicant countries

2000

2001

2002

2003

2004

2005

Bulgaria

73.6

66.2

53.2

46.2

44.4

43.2

Romania

23.9

23.2

23.3

21.8

23.5

23.5

Turkey

57.4

105.2

94.3

87.4

83.4

77.5

 

Where the Euro can be used