This website uses cookies to ensure you have the best experience. Learn more

International Financial Markets: European Monetary Union

2684 words - 11 pages

Critically analyse the current state of the European Monetary Union.

The European Monetary Union or the European Economic and Monetary Union (EMU) is the successor to its predecessor: The European Monetary System, and attempts to deliver an economic system which is unified and cohesive for all the members of the European Union. Perhaps the most notable and drastic change implemented under this systematic collection of policies is the adoption of the Euro currency over the national currencies of the member states out of which only the United Kingdom and Denmark have chosen to not follow in the footsteps of their fellow member countries.

The European Monetary Union is essentially a ...view middle of the document...

In laymen terms, the Economic and Monetary Union, a policy regulated by the European Central Bank which is also independent, implies at price stability, through the member states undergoing coordinated economic policy formulation. Such a movement would also include fiscal policies, Government limitations on debts and deficit coordination, and most importantly the formulation and utilization of a single currency unit in the Euro area.

To understand the EMU it is important to also understand the form of economic governance within the policy as it does not ascertain a single institute as the main proponent as responsible for the policy. Instead in a truly democratic measure the responsibility is spread and divided between the European Union Institutions and between member states. It is an advanced part of the economic integration process, where after preferential trading areas have been accepted, free-trade regions being established alongside customs union and a single market has been formulated, an economic and monetary union would be regulated in order to achieve total economic integration.

In this perspective one of the major achievements of the EMU was the adoption of the Euro on the 1st of January in 1999 and a decade later a population even greater than that of the United States had adopted the Euro as their own in 19 European Countries with a population of over 330million citizens. The Euro consists of a 24.4% share of the global foreign exchange reserves second to only the United States Dollar and with a global proportion of over 59 countries having either indirectly or directly connected their currency to the Euro (Artis, Nixson, 2001). Perhaps the greatest achievement of having the member states give up on their own currencies and adopt the Euro as their own was to unite the destinies of all the member states to a greater extent which requires from them solidarity and mutual respect. The unique aspect in the policy is in the fact that while monetary policy is decided through the intervention at European Level, economic and fiscal policy remains in the governance of the member state within its own borders. Thereby creating a need to adopt policies which are in the common interest (Official Journal of the European Union, 2006).

Currently participation wise, there seems to be 27 member nations participating in the European Monetary Union, depending on their varying degrees of integration. On this note, the EMU was established through three main stages.

Stage 01: 1st July 1990
This stage focused on the capital transactions being conducted in complete freedom where central banks are encouraged to participate resulting in increased co-operation and the free use of the European Currency unit the predecessor of the Euro.

Stage 02: 1st January 1994
The actual formulation of the European Monetary Institute alongside the total sanctioning of central bank credit grants to the public sector. This was part of the movement to...

Other Papers Like International Financial Markets: European Monetary Union

Decisions To Use International Financial Markets

353 words - 2 pages 1. One point of concern for you is that there is a trade-off between the higher interest rates in Thailand and the delayed conversion of baht into dollars. Explain what this means. ANSWER: If the net baht-denominated cash flows are converted into dollars today, Blades will not be obligated to depreciation in the future; in the end, there would be a decrease in the dollar cash flows and a depreciation of the baht. 2. If the net baht

Debt Crisis Essay

2404 words - 10 pages Sandoval. Erika Beltran, Sodgerel Ulziikhutag and Temuum Zorigt. The authors of the literature note that the prevalent European Sovereign debt crisis has significantly affected the European financial markets as well as the entire Eurozone. The European Union in collaboration with the international monetary fund has reacted instantaneously to avert any panic and apprehension in the Euro market through the provision of emergency aid to Portugal

Crisis in the Eurozone

1010 words - 5 pages Eurocrisis? What eurocrisis? This August, the streets of Florence, Barcelona, and London were full of Europeans on their (unimaginably long) holidays, acting with apparent disregard for the dire predictions in the press of a European Union (EU) on the verge of bankruptcy and dissolution. Meanwhile, financial markets backed off from their attacks on the PIGS (Portugal, Ireland, Greece, and Spain) while those porcine countries moved forward

Eurozone Crisis

2582 words - 11 pages . According to a recent article published in Seeking Alpha, a leading financial blog, “the Eurozone sovereign debt crisis has shown that that the European Monetary Union (EMU) has structural flaws that remain to be fully addressed.” The article also suggests that there are four possible scenarios, which seems more likely to result in a progressive step towards the resolution of the European soap opera. These four scenarios of what might be ahead

The Effects of Euro on the Euro Zone?

3495 words - 14 pages The effects of euro on the euro zone? Submitted by Fahad Irfan (8096) Submitted to Miss Sarwat Ahson Why and How Euro became the single currency? The euro is now part of everyday life in seventeen Member States of the European Union (EU). Other Member States will eventually adopt the euro. The single currency presents undeniable advantages: it lowers the costs of financial transactions, makes travel easier, strengthens the role of Europe

Causes of the Sovereign Debt Crisis

2475 words - 10 pages Japan in Wall Street – has massively increased the amount of money available to households in form of debt and thus created speculative bubbles that burst during the financial crisis. The vast debt of Southern European states is therefore determined by systemic failures. Beginning with an analysis of the systemic issues in the European Monetary Union, the design of the EMU differs significantly from Robert Mundell’s and Ronald McKinnon’s criteria

Roles of International Financial Institutions

1203 words - 5 pages .  It will be less risky for countries to join the international markets and use global financing methods because the volatility of exchange rates and asset prices in international financial markets can cause significant regulatory and economic challenges to the emerging markets as well as the established ones. International financial institutions like the International Monetary Fund (IMF) provide loans to help its members in times of financial


2584 words - 11 pages maintenance of fiscal deficits under 3% of GDP, and government debt below 60% of GDP (Roscini & Schlefer, 2012, p.1). However, during the years preceding Greece’s financial woes, 6 out of the 11 members of the European Union failed to meet at least one of these standards on numerous occasions. In particular, Germany, one of Greece’s biggest critics for failing to manage the crisis correctly, “flouted the rules for four years from 2003 (and avoided

U.S. Govt Chapt 14 Bookwork

868 words - 4 pages Jenor Rasmussen Govt. Chapter 14 1. C 2. E 3. A 4. C 5. B 6. E 7. C 8. B 9. E 10. E Bretton Woods System: international financial system devised shortly before the end of WWII that created the World Bank and the International Monetary Fund Collective security: The idea that an attack on one country is an attack on all the countries Containment: U.S policy of opposing Soviet expansion and communist

How the American Mortgage Crisis Spread to Europe

1727 words - 7 pages the European Union. Rather than being the main cause of the crisis, the lack of investment opportunities was more like a trigger. Therefore the reason for why the crisis spread cannot solely be blamed on this. The process of globalization should also take some share of the blame. Because of globalization, financial markets around the world have become so interrelated that they can be viewed as one big international financial market. This has

Editorial on the European Crisis

1004 words - 5 pages nations, such as Germany, with leading economies were not too pleased to help. While the Union discussed and disagreed, the distrust in financial markets increased and the value of the euro kept on decreasing. Finally, in May of this year, the European Union and the IMF agreed upon a rescue plan of 750,000 million euro in order to prevent the spread throughout more of the euro-zone. In parallel, all nations of Europe have to adopt their own

Related Essays

International Financial Markets Essay

3652 words - 15 pages INTERNATIONAL FINANCIAL MARKETS Topic 1 THE STRUCTURE OF THE INTERNATIONAL FINANCIAL SYSTEM Agenda   Recent developments in international financial markets The components of the international financial market  The eurocurrency market  The international equity market  The international debt market  The foreign exchange (currency) market Globalisation of financial markets  The global economy has undergone through a

International Financial Markets Essay

1579 words - 7 pages . International Financial Markets Introduction Acme is planning on having a greenfield production facility overseas. The two foreign countries that I have decided to compare for starting business in is the United Kingdom, which is part of the European Union and Hong Kong. Hong Kong is not part of the European Union. I will first analyze the UK and then Hong Kong. Analysis of the United Kingdom (UK): The United Kingdom of

Social Policy, Economics Of Labor Markets In The European Union

2813 words - 12 pages , economics of labor markets in the European Union and if the employment strategy makes any sense. In the first part of my paper I am going to talk about social policy in general and its purposes. I will also mention some of the most important social policies such as health care, education and training, and pensions. The second part of my paper deals with labor market, the facilities that it creates for the labor force and the economy as a whole. The last

To What Extent Has The Financial Crisis Challenged The Notion Economic And Monetary Union Has Been A Success In Economic And Political Terms?

2853 words - 12 pages financial crisis is the use of monetary policies. Initially, member states of European Union used to have their individual government bonds that were relatively unstable. With the introduction of this union block, all government bonds markets were converted to become European bonds market, a factor that proved to be brilliant for the way it successfully controlled economic crisis in the region for almost a decade. This means that all monetary policies