Transcript Economic and Monetary Union

Economic and Monetary Union
A., History of Economic and Monetary Union
I. Werner-plan ↔ economic and financial crisis of 1970s
II. Economic Monetary System (1979)
1. the elements of this system
a., ECU – European Currency Unit
b., European Exchange Rate Mechanism – fluctuations
of member states currency had to be contained within
a margin of 2.25% on either side of an agreed
(so-called the bilateral) rates
c., European Monetary Cooperation Fund
2. evaluation of EMS
a., successes and failures
b., it created the basis for the next step (Delors plan)
B., Current situation
I. Basis - The Delors report of 1989: three stages
II. Treaty of Maastricht – signed in 1992
1. the Delors plan is the official program of EU
2. the adoption of so-called convergence criteria
a., price stability: the annual consumer price level
(inflation) may not exceed the average rate of inflation of
the three Member States with the lowest inflation rate by
more than 1.5%
b., government budget deficit: the ratio of the annual
general government deficit relative to gross domestic
product (GDP), must not exceed 3%
c., government debt-to-GDP ratio: the ratio of
government debt relative to GDP, must not exceed 60%,
III. The process of EMU – it was realized in three stages
1. stage one: 01.07.1990 – 31.12.1993
a., abolishment of exchange control
b., liberalization of capital movement between states
2. stage two: 01.01.1994 – 31.12.1998
a., the establishment of European Monetary Institution
b., decision of the name of new currency – euro (1995)
c., selection of the countries which can participate in the
third stage (1998) – 11 countries
d., the creation of European Central Bank (1998)
3. stage three: 01.01.1999 –
a., introduction of euro (01.01.2002 – coins and notes)
b., joining of new countries – currently 19 members
4. four states – use of euro with a monetary agreement
(Andorra, Vatican City, San Marino, Monaco)
Members of euro zone (blue colour)
IV. Institution of EMU – European Central Bank
1. location - Frankfurt
2. its main objective: to maintain price stability within the
Eurozone
3. basic tasks:
a., to define and implement the monetary policy for the
Eurozone,
b., to conduct foreign exchange operations,
4. structure
a., Executive Board
b., Governing Council