Eurozone: Difference between revisions
imported>Nick Gardner No edit summary |
imported>Nick Gardner No edit summary |
||
| Line 1: | Line 1: | ||
{{subpages}} | {{subpages}} | ||
< | ==Overview== | ||
==Membership== | |||
===The Maastricht criteria=== | |||
The criteria for eurozone membership set out in the Maastricht Treaty were<ref>[http://ec.europa.eu/economy_finance/publications/publication6706_en.pdf ''The road to the euro area'', Europa]</ref> | |||
* An inflation rate not exceeding by more than 1.5% that of the three best-performing Member States in terms | |||
of price stability. | |||
* A general government deficit not exceeding 3% of GDP: an indication of sound public finances. | |||
* Public debt of less than 60% of GDP or sufficiently diminishing and approaching this value at a satisfactory | |||
pace: a measure of the longer-term sustainability of public finances. | |||
* A long-term interest rate not exceeding by more than 2% that of the three best-performing Member States in | |||
terms of price stability: an indicator of durability and credibility. | |||
* A stable exchange rate, demonstrated by participation without severe tension in the exchange rate | |||
mechanism known as ERM-II and by keeping the exchange rate close to the central rate for two years prior to | |||
adoption of the euro. This measures the robustness of the economy and the stability of real convergence | |||
by showing that the government can manage the economy without resorting to currency depreciation. | |||
===The Stability and Growth Pact=== | |||
The Stability and Growth Pact<ref>[http://europa.eu/legislation_summaries/economic_and_monetary_affairs/stability_and_growth_pact/index_en.htm ''Stability and growth pact and economic policy coordination'', Europa 2010]</ref> | |||
<ref>[http://ec.europa.eu/economy_finance/sg_pact_fiscal_policy/index_en.htm?cs_mid=570 ''Stability and Growth Pact'', European Commission 2009]</ref> that was introduced as part of the Maastricht Treaty in 1992, set arbitrary limits upon member countries' budget deficits and levels of national debt at 3 per cent and 60 per cent of gdp respectively. Following multiple breaches of those limits, the pact has since been renegotiated to introduce the flexibility necessary to take account of changing economic conditions. Revisions introduced in 2005 relaxed the pact's enforcement procedures by introducing "medium-term budgetary objectives" that are differentiated across countries and can be revised when a major structural reform is implemented; and by providing for abrogation of the procedures during periods of low or negative economic growth <ref>[http://ec.europa.eu/economy_finance/emu10/emu10report_en.pdf "Fiscal Governance". para 10.2 of ''EMU@10 Successes and Challenges After 10 Years of Economic and Monetary Union'', European Commission, 2008]</ref>. A clarification of the concepts and methods of calculation involved was issued by the European Union's The Economic and Financial Affairs Council in November 2009 | |||
<ref>[http://ec.europa.eu/economy_finance/sgp/pdf/coc/2009-11-19_code_of_conduct_(consolidated)_en.pdf ''Specifications on the implementation of the Stability and Growth Pact and Guidelines on the format and content of Stability and Convergence Programmes'', as endorsed by the The Economic and Financial Affairs Council on 10 November 2009]</ref> which includes an explanation of its excessive deficit procedure. | |||
===The stages of membership=== | |||
==The economic consequences of membership== | |||
==The financial crisis of 2010== | |||
==Prospect== | |||
==References== | |||
{{reflist|2}} | |||
Revision as of 11:16, 6 December 2010
Overview
Membership
The Maastricht criteria
The criteria for eurozone membership set out in the Maastricht Treaty were[1]
- An inflation rate not exceeding by more than 1.5% that of the three best-performing Member States in terms
of price stability.
- A general government deficit not exceeding 3% of GDP: an indication of sound public finances.
- Public debt of less than 60% of GDP or sufficiently diminishing and approaching this value at a satisfactory
pace: a measure of the longer-term sustainability of public finances.
- A long-term interest rate not exceeding by more than 2% that of the three best-performing Member States in
terms of price stability: an indicator of durability and credibility.
- A stable exchange rate, demonstrated by participation without severe tension in the exchange rate
mechanism known as ERM-II and by keeping the exchange rate close to the central rate for two years prior to adoption of the euro. This measures the robustness of the economy and the stability of real convergence by showing that the government can manage the economy without resorting to currency depreciation.
The Stability and Growth Pact
The Stability and Growth Pact[2] [3] that was introduced as part of the Maastricht Treaty in 1992, set arbitrary limits upon member countries' budget deficits and levels of national debt at 3 per cent and 60 per cent of gdp respectively. Following multiple breaches of those limits, the pact has since been renegotiated to introduce the flexibility necessary to take account of changing economic conditions. Revisions introduced in 2005 relaxed the pact's enforcement procedures by introducing "medium-term budgetary objectives" that are differentiated across countries and can be revised when a major structural reform is implemented; and by providing for abrogation of the procedures during periods of low or negative economic growth [4]. A clarification of the concepts and methods of calculation involved was issued by the European Union's The Economic and Financial Affairs Council in November 2009 [5] which includes an explanation of its excessive deficit procedure.
The stages of membership
The economic consequences of membership
The financial crisis of 2010
Prospect
References
- ↑ The road to the euro area, Europa
- ↑ Stability and growth pact and economic policy coordination, Europa 2010
- ↑ Stability and Growth Pact, European Commission 2009
- ↑ "Fiscal Governance". para 10.2 of EMU@10 Successes and Challenges After 10 Years of Economic and Monetary Union, European Commission, 2008
- ↑ Specifications on the implementation of the Stability and Growth Pact and Guidelines on the format and content of Stability and Convergence Programmes, as endorsed by the The Economic and Financial Affairs Council on 10 November 2009