The introduction of the Euro has had success in promoting trade and price stability but it has had only limited success in promoting structural reform across the Euro-zone

Résumé du document

The Euro is the accomplishment of the Economic and Monetary Union in Europe (EMU). In 1989, Jacques DELORS was the president of the European Commission. With the help of his vice-president, Frans ANDRIESSEN and of the European Economic Community central banks governors, he came out with a report (the DELORS Report) which aimed to actualize the EMU. There were 3 phases with the following objectives: Reinforcing the central banks cooperation, creating a European central banks system, operating a progressive transfer of decision power relative to monetary policy to supranational institutions and finally to fix the parities between national currencies which were going to be substituted at the end by the Euro. In 1992 the Maastricht treaty transformed the EEC into a complete Economic and Monetary Union, and the 15 member states in favor of a unique currency signed their adherence at the Madrid Treaty in 1995.

Extraits

[...] The inflation rate must be below but close to it to prevent deflation. The ECB has a lever which is his key rate. It increases or decreases this rate in order to maintain the inflation rate below but the rate also has to stay close to in order to prevent a possible deflation. This key rate is the rate at which every bank can the money” to the central bank. When this rate is high, there are fewer loans made by people and companies because of the high interests' costs: the investments and the demand decreases as a result and there is less inflation because the companies tend to lower prices in order to keep their clients. [...]

[...] Indeed if the states succeed in maintaining their annual deficit ratio around it means that they possibly can use the money saved in order to finance these expansive reforms. On the other hand, what seems to happen is more that the states have a big problem in staying within this range of and they do not try to save money in order to finance structural reforms, they rather try to restrict their budget in order to stay within the limits. [...]

[...] ECB website, Monetary policy strategy, http://www.ecb.int/ecb/educational/movies/mopo/html/index.en.html [accessed 13th February 2009] X. Alberto Alesina, Francesco Giavazzi, The Future of Europe: Reform or Decline, pages 146-150 XI. Ben Patterson, February 2006, The Euro: Success or Failure?, http:// /search?q=cache:bu3QwuRtuVgJ:www.cleg.org.uk/The%2 520Euro%2520- %2520Success%2520or%2520Failure.doc+ben+patterson+the+euro&hl=fr&ct=cln k&cd=5&client=firefox-a [accessed the 13trh February 2009 XII. Niels Thygesen Structural reforms in the euro area, http://www.europarl.europa.eu/comparl/econ/pdf/emu/speeches/20030612/q2 _thygesen.pdf [accessed the 15th February 2009] XIII. Euro history (translated from French), http://www.euroline- detection.com/historique_euro_euroline_page_speciale_euro-Francais [accessed 12th February 2009] XIV. The Delors Report, http://www.dip- badajoz.es/eurolocal/entxt/emu/antecedentes/delors.htm [accessed the 13th February 2009] XV. [...]

[...] Thus since the euro has been adopted the price stability has been a success. (Source: GoldenBoys Website) We can see that since 1999, the inflation rate was near from 2%. The increase in 2008 is due to the global financial crisis which has made a strong increase of the inflation's phenomenon: the bank's traders who have lost a lot of money in the stock exchange's crisis speculate on products like petrol, food . and as a result the prices increase. [...]

[...] However, the Euro was a big change in itself but it seems that it failed in promoting long-term structural reforms because of different factors such as the SGP policy. Nevertheless, a Central Bank (such as the ECB) can have a keen interest in designing and implementing structural reforms: simply because structural reforms in labour and product markets for example can increase the supply side of the economy and hence increase the growth rate of potential output, that is to say the rate at which aggregate demand can grow without running into bottlenecks and more rapid increase in prices than are considered as acceptable by the ECB. [...]