Specific Objectives and Competences
- To know the origin of the single currency and which countries form part of it.
- To understand the principles which govern the monetary policy of the euro area.
- To understand the role of the ECB as the coordinator of monetary policy within the euro area.
- The plans for the creation of the Economic and Monetary Union (EMU) began with the publication, by what was then the European Economic Community (EEC), of the Barre Report in 1969, which provided for a greater coordination of the economic policies of the member states.
- Later, in 1979, the European Monetary System was created in response to the collapse of the system established at Breton Woods, which had guaranteed currency stability since the post-war period. This system, known as “the gold standard”, linked the dollar to the official price of gold, while the other countries established their fixed exchange rates with respect to the dollar.
- Following the signing of the Treaty of Maastricht, in 1992, the new framework of the Economic and Monetary Union (EMU) was created. At that time, it was clear that there was a need for a common currency to reduce the cost of transactions between the companies of the EU and to fulfil all of the potential offered by the single market
- The three phases previous to the creation of the EMU were:
- From 1990 onwards: the dismantling of internal barriers to the free circulation of goods, people, services and capital within the EU.
- The entry into service of the European Monetary Institute (EMI), in 1994, which marked the beginning of the technical preparations and established the first requisites for its implementation in the member states. In 1998, the European Central Bank (ECB) replaced the EMI.
- In 1999, fixed exchange rates were established between the national currencies and the Euro. The EU Council had previously certified that the eleven participating member states complied with the required criteria.
- A series of convergence criteria were established to guarantee the stability of the EMU. These objectives could be summarised as: control of the public deficit, price stability, low interest rates, exchange rate stability for at least the two previous years, and the guarantee of compatibility between national legislation and that laid out in the treaties.
- Finally, on 1st January 2002, the Euro coins and notes were put into circulation in what was the greatest change of its type in history.
- The introduction of the Euro has had many advantages for the citizens of the EU. Even so, it has also provoked quite a lot of criticism, above all with respect to its effect on prices and the consequent increase in the cost of living. These are some of the consequences of the introduction of the Euro.
- Positive: low interest rates, greater price transparency, the elimination of transaction costs and fluctuations in the exchange rate.
- Negative: price increases, private indebtedness and loss of control over part of economic policy. Also, the capacity to bring together and move large quantities of money in a reduced space offered by € 500 notes, which has facilitated organised criminal activity, tax evasion and the black economy, etc.
Based on the explanation of the possible consequences of a member state leaving the euro, discuss the advantages and inconveniences of such a measure.
> 15 Is the Euro responsible for the increase in prices? (es) (en)
> 15 Eurobarometer relating to the introduction of the Euro (en)
> 15 The euro area (es, en)
12-15 The idea of the euro (bg, da, et, cs, de, el, es, en, fr, it, lv, lt, hu, mt, nl, pl, pt, ro, sl, sk, fi, sv, 2’31’’)
12-15 The Euro is a currency designed to fail (en, 2’31’’)
> 15 Year in which the euro came into circulation (© European Union, 2013)
> 15 The criteria for convergence (da, de, el, en, es, it, fr, fi, nl, pt, sv)
> 15 Complementary information about the phases of the EMU (bg, da, et, cs, de, el, es, en, fr, it, lv, lt, hu, mt, nl, pl, pt, ro, sl, sk, fi, sv)
> 15 The Euro outside the euro area (en)
> 15 The Euro in the world (bg, da, et, cs, de, el, es, en, fr, it, lv, lt, hu, mt, nl, pl, pt, ro, sl, sk, fi, sv)