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Published byAron Trenton Modified over 9 years ago
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History of European integration 1950 - European Payments Union 1951 - European Coal and Steel Community 1957 - Treaty of Rome 1970s & 1980s - Expansion of EU 1986 - Single European Act 1992 - Maastricht Treaty 1999 - EMU
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Two dimensions Political -Council of Ministers as decision making body -European law -European Parliament (directly elected since 1979) Economic -Eliminate internal customs duties and quotas -Common external trade policy -Creation of single market
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GDP growth 1990-2000
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Unemployment 1990-2000
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No New Economy in Europe Productivity growth 1990-2000
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EMU: What happened? January 1, 1999 (Stage IIIA) –Formal launch of euro –ECB takes over monetary policy January 1, 2002 (Stage IIIB) –Introduction of euro notes & coins
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EMU Profound change in international monetary relations –Between the countries of Europe –Between Europe and the rest of the world Model for what we will see in the 21st century?
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Why does it matter for Europe? Fundamental change in monetary policy ECB independent Mandate for price stability Significance of currency as symbol of sovereignty Move towards “super state”
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The euro
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The €1 coin
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The €5 note (front)
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The €5 note (rear)
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The €10 note (front)
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The €10 note (rear)
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The €50 note (front)
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The €50 note (rear)
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The €100 note (front)
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The €100 note (rear)
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The €200 note (front)
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The €200 note (rear)
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The €500 note (front)
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Institutions European Central Bank European CommissionEuropean Parliament Council of Ministers
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Policy making institutions 6 Executive Board Members of the ECB Governing Council of the ECB 12 National Central Bank Governors Monetary policy for euro area
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Strategy & accountability Twin pillars of ECB monetary policy strategy –Broad based assessment of outlook for price stability –Reference value for money growth Quantitative definition of price stability –2% inflation or less
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Three facets of EMU Creation of European “super state” Deepening and strengthening the single market Monetary stability through new institutions
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Why does it matter for the US? Europe is our most important trading partner Europe is the most important source of investment in the US The euro as a competitor with the dollar
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Destination of US exports
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Source of US imports
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Source of US FDI
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Destination of US FDI
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The euro as a competitor with the dollar US dollar dominant in international transactions –size and global reach of US –stability of purchasing power Benefit to US: seigniorage revenue Challenge from high-denomination euro notes?
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A model for the future? National central banks an expensive luxury? The debate over dollarization Monetary union as an alternative?
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Dollar-euro exchange rate $ per Launch of EMU $ per ECU prior to 1999
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EU expansion Euro area Other EU Candidate countries Candidate countries not shown: Malta and Cyprus
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The demographic timebomb
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Will the euro displace the dollar? Dollar currently the primary international currency Euro has potential to match and even displace the dollar But...
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Will the euro displace the dollar? Difficult to dislodge established currency Thirty years for dollar to displace sterling Would it matter?
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