European Economic Controversies

By 1997, the Stability and Growth Pact were introduced to help the EMU retain the fiscal standard it had set for itself in Maastrict in 1991. The Pact reinforced the concept that no EMU participant countries may enable their deficits to exceed 3% of Gross Domestic Product (GDP). Fines and sanctions would be brought to bear on countries that failed to comply. The objective, among others, inherent during the Pact was to make certain that EMU budgets could remain balanced, revenues could remain efficient, and also the EU could enlarge even though in beneficial fiscal health (Ciminero & Vietor 14).

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The excellent sense of the Stability and Growth Pact is difficult to deny, as it performs a important dual function: it's a means by which the EMU may well remain both real to its origins as set out in Maastrict as well as provide for its continued economic accomplishment inside coming years. While Ciminero and Vietor don't purport to illustrate in their learn "either effective or ineffective handling of an administrative situation" (1, note), their extrapolation in the Pact associates it using a string of desirable economic objectives (balanced budgets, efficient revenues, etc.) discussed above. Its very existence lends credence on the idea that the convergence requirements established in the Maastrict Treaty need to not be forsaken during the face of an uncertain economic future.

In the coming years, the uncomplicated tenets on the Maastrict Treaty need to continue being noticed inside European Monetary Union.

On a far more certain note, the euro hit new highs against the dollar in 2004, and so brought its trade-weighted rate to the same level that it was at once it launched in 1999 (The Economist 63). As The Economist noted in 2004, "a rising currency might be great inside the euro area if it helps to maintain down inflation and boost consumers' spending power," however, this salient simple fact has a warning label attached to it, namely that "a rising euro will?complicate monetary policy. Cutting interest rates to dampen the euro and aid recovery would risk fueling the growth of liquidity" (63).


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