This, on the heels of the January 11 unilateral French intervention in Northern Mali.
I am particularly honored to be presenting the Whitman Lecture, as we prepare to celebrate 10 years since the decision to launch the European single currency. This historic move signaled a watershed in European integration.
The foundations of the single currency lay in 50 years of European economic integration: In recognition of the tenth anniversary, I will present a special report in May of this year to mark the achievements of the first decade of the Economic and Monetary Union EMU and to provide a detailed analysis of the challenges that we will face in the coming decade.
The report aims to stimulate further debate on euro area policymaking. Therefore, where better than the Peterson Institute to give an early preview of our findings?
I will review the performance of the euro over its first decade and set out how new global trends are reshaping our future policy agenda for EMU.
Performance of the Euro in the First Decade The introduction of the euro implied the beginning of a new era for economic policymaking in Europe, with a new environment calling for new arrangements for economic policy coordination.
And the significance of the euro's launch goes far beyond its economic dimension. Its introduction in was the crowning achievement of a hugely complex political, legal, and technical process. It also sent a political signal to the rest of the world that Europe was capable of taking far-reaching decisions to define a common future for a continent that had all too often suffered from wars and political instability.
Of course, there were dissenting voices. I recall one economist describing the creation of the euro as "at best, an act of uncertain merit" and another denouncing it as a "great mistake. And I am pleased to say that the euro has proved an economic success.
The defining achievement of EMU has been to anchor macroeconomic stability in Europe.
EMU has put an end to periods of internal currency turbulence within the euro area and made us more resilient to negative external developments, as the euro area's economic strength in the face of continuing financial turmoil testifies. The result has been a decade of low and stable inflation.
|Political Risk Analysis: Insightful, Relevant, Quantifiable||The Euro, the Dollar, and Their Impact on Global Manufacturing by Jeff Faux The introduction of the euro is the most important event for the global financial markets since the United States abandoned the gold backing for the dollar in Although it is a major topic in the European media, the drop in the value of the euro against the dollar since its introduction is not necessarily an indication of its future course.|
Indeed, over the last decade EMU's impressive record of price stability has anchored inflation expectations around the European Central Bank's ECB goal of close to 2 percent, with the result that interest rates have been sharply reduced for many participating member states.
I believe that even in today's environment of rising oil and commodity prices, EMU will shield our economies better than has been the case at any moment in the past. Budget balances have improved significantly in less than a decade of economic and monetary union.
Government deficits have declined considerably in comparison with previous cycles-and in the euro area more so than elsewhere. In the majority of euro area countries, government debt has also been reduced.
Clearly the reform in of our framework of fiscal rules-the Stability and Growth Pact-has helped drive a renewed commitment to sound public finances, which is paying off. We have now achieved the best structural balances since and have started dealing with the quality and efficiency of our public spending.
However, long-term fiscal sustainability constitutes a major challenge in view of demographic trends in Europe and is an issue we will continue to address.
A major success story of the first ten years of EMU has been the significant growth in employment, boosted by measures taken under the Lisbon Strategy to reform labor markets.
With almost 16 million new jobs created in the euro area during the last decade, job creation has by far outpaced that of other mature economies, including the United States. In parallel, the unemployment rate has fallen to 7 percent in The euro has delivered new opportunities for the development of financial markets and has spurred their integration, fostering deeper and more liquid bond and money markets in Europe.
The movement of cross-border capital towards its best use has been encouraged, as well as risk diversification and associated cyclical smoothing. Finally, EMU's success is marked by the rising number of member states joining the euro area.
Three new countries have joined the original 12 members in the last two years, and the euro area is set to enlarge further in the future. Some Expectations Not Met But we acknowledge that in some respects, our initial expectations have not been fully met.
From the outset, we hoped that increased exposure to competition implied by EMU and the removal of the exchange rate and monetary policy instrument would stimulate structural reforms much more forcefully. We anticipated faster integration of product and labor markets that would boost higher growth and productivity.
Progress has been made. Take the wide ranging reforms implemented in the European telecoms sector that have increased productivity significantly. But overall progress has fallen short of expectations.
GDP growth and productivity performance have underperformed compared to other economies in an environment of global growth.
Progress towards structural reforms has been slow and has prevented us from fully benefiting from the productivity enhancements that new technologies and more competition could bring. As a result, the capacity of euro area countries to adjust to economic shocks has not been as efficient as it could be, leading to persistent divergences in growth and inflation figures across euro area countries.
We clearly have to tackle the causes at the root of this insufficient progress in order to further strengthen the euro area economy. But our policy agenda will also be shaped by the major shifts that are taking place in our economies and societies due to changes in the global landscape.The European Financial Crisis - Analysis and a Novel Intervention 1 The European Union is a group of countries with outstanding natural resources, human resources, and infrastructure.
It is also a region of territorial and national diversity, with million people in . that the euro has promoted trade significantly, with the aggregate impact being in the range of 5% or so. Note that we have made great efforts to separate the euro’s impact from the impact of other pro-integration policies that were also being implemented in the .
Euro-denominated international debt accounts for almost 49 percent of the outstanding stock of international bonds and notes.
In global foreign exchange markets, the euro is the second most actively traded currency after the US dollar. The Effects of the Common Currency on Europe’s Economic Integration Working papers are papers in Euroland’s economy compared to the US and some EU countries who regarding the international role of the Euro and the ability of Europe to deal with both, the American and Chinese, challenge.
Nov 30, · The Economist offers authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them. European economy. Ultimately, the fate of the euro will mirror the fate of the European economy.
Based on the economic fundamentals, the euro certainly has the potential to become a second reserve currency for the world’s financial system. Together, the eleven economies of the EMU are almost as large as the United States.