Single currency and fiscal performance: the early Euro Area in perspective

The article analyses the manifestations of a market failure problem revealed during the economic crisis in the euro area, namely business cycles, market inability to ensure money circulation and avoid inflation. It is shown that the cyclicity of economic development has revealed in various degrees of economic contraction and different rates of its recovery. These differences have been exacerbated by the new procyclical factors emerged from the transition to a single currency. As for money circulation the crisis has almost no impact on the single currency functioning: the euro has maintained its position on the world market and properly performed money functions in the domestic. The goal to achieve economic development without inflation in the euro area generally has been solved successfully by the European Central Bank (ECB). However, due to the fact that the ECB in its monetary policy does not pay sufficient attention to the increased inflation in small and relatively poor countries, the crisis has been more acute in them than in large countries with low inflation. The goals of ensuring money circulation and avoiding inflation can be settled more effectively in the euro area in case of more tight coherence in economic policy and strengthening of supranational mechanisms of economic governance.

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Euro-area/Greece deal will not avert Grexit risk

Emerald Expert Briefings ◽

10.1108/oxan-db200927 ◽

2015 ◽

Keyword(s):

Economic Policy ◽

Euro Area ◽

Single Currency ◽

Content Type

Significance The agreement testifies to the wish of all parties to avoid a euro-area breakup. It averts the risk of Greece's immediate exit from the single currency. However, the risk of Grexit remains. The deal involves Greece accepting restrictions on its economic sovereignty, and the euro-area aligning with the tough conditionality demanded by Germany and other 'hawks'. Parliamentary rejection in Greece and/or by prospective creditors might yet upend negotiations on a new bailout. Impacts The crisis has damaged Germany internationally, because of the tough line it has taken, and strained Franco-German relations. The ECB's status as a politically independent institution is likely to be damaged however Greece-creditor relations develop. Eurosceptics are likely to gain from the demonstration of the extent of economic policy sovereignty loss required by euro-area membership.

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Comparison Between Bulgaria and Croatia in their Road Towards ERM II and The Banking Union of the EU

Research Papers ◽

10.37075/rp.2021.5.12 ◽

2021 ◽

Vol 61 (5) ◽

pp. 263-276

Keyword(s):

Member State ◽

Euro Area ◽

The Other ◽

Banking Union ◽

Single Currency ◽

Other Hand ◽

Close Cooperation ◽

The Eu

The last ERM II accession before July 2020 was in 2005. After the establishment of the Banking Union of the EU, starting from 2014, there was no enlargement of ERM II by EU Member State that is outside the Euro area. Therefore, the accession on 10 July 2020 of Bulgaria and Croatia to the ERM II on one hand and to the Banking Union on the other hand through the mechanism of the so-called close cooperation with the ECB represents a particular interest. The participation in these two mechanisms is a precondition for the accession to the Euro area and the adoption of the single currency. The comparison between the two countries shows that their path to the ERM II and the Banking Union is quite similar. However, there are also few peculiarities.

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Banking union in a single currency area: evidence on financial fragmentation

Journal of Financial Economic Policy ◽

10.1108/jfep-10-2014-0058 ◽

2015 ◽

Vol 7 (3) ◽

pp. 251-274 ◽

Cited By ~ 5

Author(s):

Diego Valiante

Keyword(s):

Data Analysis ◽

Euro Area ◽

Financial Integration ◽

Institutional Design ◽

Home Bias ◽

Banking Union ◽

Single Currency ◽

Content Type ◽

Currency Area ◽

The Impact

Purpose – The purpose of this paper is to assess the impact of the impact of the single currency on the institutional design of the banking union, through evidence on the financial integration process. Design/methodology/approach – Data analysis uses multiple sources of data on key drivers of financial fragmentation. The paper starts from a snapshot the status of financial integration and then identifies the main components of this trend. Findings – Evidence shows that financial integration in the euro area between 2010 and 2014 retrenched at a quicker pace than outside the monetary union. Home bias persisted. Under market pressures, governments compete on funding costs by supporting “their” banks with massive state aids, which distorts the playing field and feed the risk-aversion loop. This situation intensifies frictions in credit markets, thus hampering the transmission of monetary policies and, potentially, economic growth. Taking stock of developments in the euro area, this paper discusses the theoretical framework of a banking union in a single currency area with decentralised fiscal policy sovereignty. It concludes that, when a crisis looms over, a common fiscal backstop can reduce pressures of financial fragmentation, driven by governments’ moral hazard and banks’ home bias. Research limitations/implications – Additional research is required to deepen the empirical analysis, with econometric modelling, on the links between governments’ implicit guarantees and banks’ home bias. This is an initial data analysis. Originality/value – Under market pressure, governments in a single currency area tend to be overprotective (more than countries with full monetary sovereignty) towards their own banking system and so trigger financial fragmentation (enhancing banks’ home bias). To revert that, a common fiscal backstop is an essential element of the institutional design. The paper shows empirical evidence and theory, as well as it identifies underlying market failures. It links the single currency to the institutional design of a banking union. This important dimension is brought into a coherent framework.

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Monetary Policy and Euro Area Governance in the EMU

Specialized Administrative Law of the European Union ◽

10.1093/oso/9780198787433.003.0010 ◽

2018 ◽

Author(s):

Herwig C H Hofmann

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Monetary Union ◽

Euro Area ◽

European Central Bank ◽

Central Banks ◽

Single Currency ◽

Diverse Range ◽

European Central ◽

The Eu

One of the European Union’s most ambitious policy projects to date is the ‘economic and monetary union whose currency is the euro’ (EMU, Article 3(4) TEU). The EMU’s two polices—the economic union and the monetary union—are an unequal set of twins. On one hand, the monetary union’s central elements are well developed: as an element of substance, the introduction of the euro as a single currency; as an institutional achievement, the creation of the European System of Central Banks (ESCB) together with the European Central Bank (ECB) on the EU level as a highly independent body having the power to adopt a diverse range of measures. Additionally, the Treaties contain specific provisions on the goals and principles of monetary policy.

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The Institutional design of Financial Supervision and Financial Stability

The EU Law of Economic and Monetary Union ◽

10.1093/oso/9780198793748.003.0024 ◽

2020 ◽

Author(s):

Jennifer Payne

Keyword(s):

European Union ◽

Financial Market ◽

Monetary Union ◽

Euro Area ◽

Financial Stability ◽

Institutional Design ◽

Turn Of The Century ◽

Financial Supervision ◽

The European Union ◽

Single Currency

Since the inception of the European project, the creation of a single financial market has been a core policy goal. The ambition of the project subsequently expanded to include both economic and monetary union (EMU), a plan which came to fruition with the establishment of a single currency for euro area countries at the turn of the century. EMU has been said to be a ‘cornerstone of the European Union’, and may be regarded as a political as much as an economic endeavour.

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The State of Nominal Convergence in Romania in the Context of Joining the Euro Area

International conference KNOWLEDGE-BASED ORGANIZATION ◽

10.2478/kbo-2019-0050 ◽

2019 ◽

Vol 25 (2) ◽

pp. 14-19

Author(s):

Cristina Maria Bătuşaru

Keyword(s):

Monetary Policy ◽

European Community ◽

Euro Area ◽

Irreversible Process ◽

The State ◽

European Countries ◽

Convergence Criteria ◽

Single Currency ◽

Current State

Abstract The repeated postponement of the deadlines set for Romania’s accession to the Eurozone as well as the challenges facing the nominal convergence criteria raised many questions among the European community regarding the competitiveness of the Romanian economy in relation to the economies of the European countries adopting the single currency. The present paper aims to present the current state of nominal convergence our country manages to achieve and to import compliance with these criteria by exemplifying the concept of optimal monetary areas. The adoption of the single currency must be achieved in the context of sustainable convergence that guarantees the minimization of costs caused by the renunciation of national monetary policy. To achieve this goal, the present paper presents the optimal context that Romania’s shift to the single currency should take into account in order to maximize its benefits from the beginning of this irreversible process.

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The regional innovations governance: Slovakia with regard to convergence criteria

Marketing and Management of Innovations ◽

10.21272/mmi.2021.1-13 ◽

2021 ◽

pp. 170-180

Author(s):

Eniko Korcsmaros ◽

Renata Machova ◽

Zoltan Seben ◽

Tibor Zsigmond

Keyword(s):

Interest Rates ◽

Euro Area ◽

Pearson Correlation ◽

Convergence Criteria ◽

Single Currency ◽

Innovation Development ◽

The Public ◽

Government Deficit ◽

The Eu

The introduction of the euro in Europe is subject to several criteria. In 1979, the European Community created the «European Exchange Rate Mechanism» (ERM). On 16 April, 2003, Slovakia, together with nine other countries, signed the EU Accession Treaty in Athens. These countries promised to adopt the single currency (the euro). It has been 10 years since the introduction of the euro in Slovakia. It stands to highlight factors that have contributed to the economic, innovation development experienced in recent years regarding introducing a single currency. This article aims to briefly introduce the euro area and present each country's accession in historical order. the authors presented the general conditions for introducing the euro and then went on to the events related to the regional innovations governance of Slovakia. Using the data from the statistical site Eurostat, the Pearson correlation coefficient was used to indicate the closeness of relationships between the average values of inflation and government deficit and the average values of inflation and the public debt. The limitations of the research are that Eurostat's values are only indicative and, in the event of a possible accession, EU bodies would certainly use other, more reliable data. Furthermore, the ERM II criterion for joining the euro area cannot be examined due lack of statistics available on the Slovak koruna's value after the introduction. Another limitation is that the EU sometimes makes adjustments to calculating inflation and average nominal long-term interest rates. There is a lack of a significant relationship between the examined variables in the case of Slovakia. Based on the 2018 inflation rate, the introduction would not have been possible, as it was slightly higher (2.5 per cent) than the limit (2.23 per cent). Therefore, the authors assumed that Slovakia had adopted the euro on time, as if it had not done so on 1 January 2009, it would probably have had to wait a few years for the new opportunity. Although their results are only indicative and not decisive without taking ERM II into account, it is possible to do without specific indicators.

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Greek bailout backtrack would split German government

Emerald Expert Briefings ◽

10.1108/oxan-db201215 ◽

2015 ◽

Keyword(s):

Euro Area ◽

Debt Relief ◽

Party Leader ◽

Single Currency ◽

Social Democrat ◽

German Government ◽

Content Type ◽

Christian Democratic Union ◽

Finance Minister ◽

Christian Social Union

Significance The prospect of the euro-area extending Greece another bailout, to keep it in the single currency, has opened differences between Merkel and Finance Minister Wolfgang Schaeuble; a split in the Christian Democratic Union/Christian Social Union (CDU/CSU); tensions between the CDU/CSU and its Social Democrat (SPD) coalition partner; and SPD unhappiness about party leader and Economy Minister Sigmar Gabriel. Impacts Schaeuble is unlikely to exit government. His continued presence binds in a significant share of CDU/CSU MPs unhappy over Greece policy. A split in AfD is likely to divide the popular eurosceptic vote and keep Merkel's greatest anti-bailout problem an intra-party one. Intra-CDU/CSU opposition to further concessions to Greece restricts Merkel's leeway in euro-area negotiations Nominal debt relief for Greece will thus remain a 'red line' for the German government, straining relations with France. With Gabriel remaining a weak and controversial SPD leader, the question of who could challenge Merkel in 2017 looms large.

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