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Creating a Single Currency |
| Section: CURRENT ISSUES / SPECIAL REPORT--EUROPEAN UNION AT LAST? |
| Author: Frank Weiss |
| Publication:
The World & I Online |
| Issue Date: 2/1/1997 |
| Size: 2,615 Words, 16,547 Characters |
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To the detached observer, Europe presents an abstruse picture. National governments and the European Union bureaucracy make policy, and hence news, that is oddly at variance with much of underlying economic reality. At present, attention is focused on individual countries' ability to meet the criteria laid out in the Maastricht Treaty for automatic opening participation in the common European currency in 1999.
It is rarely ever noticed that opening participation is possible without meeting the criteria, and that the criteria, whatever their other merits or demerits, will hardly affect what is unarguably Continental Europe's single most important problem: high and persistent unemployment. The single-currency criteria are also particularly irrelevant to coping with the wishes of the European Union's eastern neighbors for a speedy admission process.
The European currency
The criteria for automatic admission to the single-currency scheme are seemingly straightforward: (1) an inflation rate no more than 1.5 percent above the average rate of the three members with the lowest inflation; (2) long-term interest rates no more than 2 percent above the average rate of the three members with the lowest interest rates; (3) a budget deficit less than 3 percent of gross domestic product (GDP); (4) public debt no higher than 60 percent of GDP; and (5) no deviation of the currency from the normal bandwidth in the European Monetary System.
If the letter of the law had to be adhered to, a monetary union consisting of Ireland and Luxembourg could be formed, an obvious irrelevancy. But of course there is no need to adhere to the letter....
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...them run out. It was, after all, the political difficulty of finding the required money that led to some agricultural policy reform, though not enough.
Europe's postwar institutions were well adapted to smooth sailing; they failed when the going got rough. They are just being sustained financially now. Only bad surprises will induce Europeans to reform--otherwise they will just plod along.
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Publication Details
(The World & I Online) |
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The World & I Online is a
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