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1. EMU and the euro . . . (for dummies?)
Presentation by Nigel Nagarajan
Faculty Orientation for the 2009 Euro Challenge
New York, November 25th 2008
2. What are we going to cover today? What is EMU?
What are the costs and benefits of having a single currency?
How is economic policy made in a monetary union?
3. What EMU isn?t Sorry to disappoint you, but . . .
4. What does EMU stand for? Does EMU stand for:
European Monetary Union?
Economic and Monetary Union?
5. EMU vs. the euro area EMU is a Treaty objective shared by all 27 EU Member States
The euro is a reality for 16 Member States (?the euro area?)
What about the ?E? in EMU?
6. What are the three parts of EMU?
7. Which countries are in the euro area? Euro area: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovenia, Spain.
EU Member States obliged to adopt the euro eventually: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Sweden.
EU Member States with an opt out from adopting the euro: Denmark, United Kingdom.
8. How does a country join the euro? A Member State must fulfill the ?convergence criteria? laid down by the Maastricht Treaty:
Low interest rates
Low government deficit
Low government debt
Stable exchange rate (ERM II)
9. What are the benefits of the euro? And the costs? CITIZENS benefit from greater price transparency, which should stimulate competition and reduce prices and from the elimination of currency exchange costs
For BUSINESSES it is easier to make investment decisions (no exchange rate risk)
The ECONOMY benefits from price stability, and lack of exchange rate risk
11. Economic policy in EMU
12. Economic policy making - the euro area and the US
13. Conclusions The launch of the euro was a tremendous achievement for the EU
But EMU is still a work in progress (especially for the ?E? part)
How will the euro area cope with its first recession?
Can you have a monetary union without a complete economic union? Without a political union?