ורויה שוגו יפוריאה דוחיאהyashiv/eu_emu_april 7_2019.pdf · a promising first...

האיחוד האירופי וגוש היורו

ט"תשע' סמסטר ב-ערן ישיב ' פרופ-2007אינטגרציה כלכלית ופיננסית והמשברים מאז

2Source: europa.eu

ההיסטוריה של האיחוד האירופי וגוש היורו

' סמסטר ב-ערן ישיב ' פרופ-2007אינטגרציה כלכלית ופיננסית והמשברים מאז ט"תשע

• http://www.europarl.europa.eu/external/html/euenlargement/default_en.htm

• https://europa.eu/european-union/about-eu/history_en

Which countries have adopted the euro - and when?

• https://www.ecb.europa.eu/euro/intro/html/map.en.html

הבנק המרכזי האירופי

https://www.ecb.europa.eu/ecb/orga/escb/html/index.en.html

https://www.ecb.europa.eu/ecb/orga/decisions/govc/html/index.en.html

• https://www.ecb.europa.eu/mopo/html/index.en.html

המשטר המוניטארי לפני היורו

The EMS: 1979–1998

• From 1979 to 1993, the EMS defined the exchange rate mechanism to allow most currencies to fluctuate +/– 2.25% around target exchange rates.

• The exchange rate mechanism allowed larger fluctuations (+/– 6%) for currencies of Portugal, Spain, Britain (until 1992) and Italy (until 1990).

• These countries wanted greater flexibility with monetary policy.

• The wider bands were also intended to prevent speculation caused by differing monetary and fiscal policies.

The EMS: 1979–1998 (cont.)

To prevent speculation,

• early in the EMS some exchange controls were also enforced to limit trading of currencies.

• But from 1987 to 1990 these controls were lifted in order to make the EU a common market for financial assets.

• A credit system was also developed among EMS members to lend to countries that needed assets and currencies that were in high demand in the foreign exchange markets.

The EMS: 1979–1998 (cont.)

• But because of differences in monetary and fiscal policies across the EMS, market participants began buying German assets (because of high German interest rates) and selling other EMS assets.

• As a result, Britain left the EMS in 1992 and allowed the pound to float against other European currencies.

• As a result, the exchange rate mechanism was redefined in 1993 to allow for bands of +/–15% of the target value in order devalue many currencies relative to the deutschemark.

The EMS: 1979–1998 (cont.)

• But eventually, each EMS member adopted similarly restrained fiscal and monetary policies, and the inflation rates in the EMS eventually converged (and speculation slowed or stopped).• In effect, EMS members were following the restrained monetary

policies of Germany, which has traditionally had low inflation.• Under the EMS exchange rate mechanism of fixed bands, Germany

was “exporting” its monetary policy.

הדרך ליורו

Policies of the EU and EMS• The Single European Act of 1986 recommended that many

barriers to trade, financial asset flows, and immigration be removed by December 1992.• It also allowed EU policy to be approved with less than

unanimous consent among members.

• The Maastricht Treaty, proposed in 1991, required the 3 provisions to transform the EMS into an economic and monetary union.• It also required standardizing regulations and centralizing

foreign and defense policies among EU countries.• Some EU/EMS members have not ratified all of the clauses.

Policies of the EU and EMS (cont.)• The Maastricht Treaty requires that members that want to

enter the economic and monetary union 1. attain exchange rate stability defined by the ERM before

adopting the euro.2. attain price stability: a maximum inflation rate of

1.5% above the average of the three lowest national inflation rates among EU members.

3. maintain a restrictive fiscal policy: • a maximum ratio of government deficit to GDP of 3%.• a maximum ratio of government debt to GDP of 60%.

Policies of the EU and EMS (cont.)• The Maastricht Treaty requires that members that want to

remain in the economic and monetary union1. maintain a restrictive fiscal policy:

• a maximum ratio of government deficit to GDP of 3%.• a maximum ratio of government debt to GDP of 60%.• Financial penalties are imposed on countries with

“excessive” deficits or debt.• The Stability and Growth Pact, negotiated in 1997, also

allows for financial penalties on countries with “excessive”deficits or debt.

Fig. 21-2: Inflation Convergence for Six Original EMS Members, 1978–2012

THE FIRST TWENTY YEARS OF THEEUROPEAN CENTRAL BANK:

MONETARY POLICY

Hartmann, P and Smets, F. 2018. 'The first twenty years of the European Central Bank: monetary policy'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13411

Four episodes corresponding to cyclical downturns and upturns:

1. The initial period of a growth slow-down following the collapse of the dotcom-bubble accompanied by a weak euro exchange rate (1999-2003).

2. The boom period in money and credit growth accompanied by relatively stable inflation and accelerating growth (2004-2007).

3. The double-dip recession due to the outbreak of the US financial crisis and the emergence of the euro area sovereign debt crisis (2008-2013).

4. The most recent lowinflation recovery period (2014-2017).

Four periods for some main macroeconomic variables (upper panel) and two key monetary policy indicators (lower panel).

The figure also marks major ECB monetary policy actions (lower panel) and other important events (upper panel) characteristic for the respective period.

34Figure 5 shows the three policy rates – MROR, DFR and MLFR –between January 1999 and August 2018.

Unfinished business —Europe’s currency 20 years

on (from FT)

On January 1 1999, 11 countries fixed their exchange rates and created a new currency: the euro.

Three years later euro coins and notes came into circulation.

Eight additional countries have joined the currency over the following years and seven more could join once they meet the criteria.

After 20 years, the euro has been a successful project measured by its adoption and support.

Three- quarters of people in the eurozone are in favour of the euro, the highest since 2004 seemingly dispelling the impression of rising anti-euro sentiment in many countries.

A GLOBAL CURRENCY• The euro has become the second most important currency in

the world. It accounts for 36 % of global payments and 20 % of all central banks’ foreign reserves, second only to the dollar.

• The euro is used by 340m people in 19 countries. Another 175m people outside the eurozone either use it or peg their own currency to it.

• About 38 %of the eurozone population has not known any other currency in their adult life. The process of mentally converting to a country’s former currency is a thing of the past.

In all countries of the eurozone, a majority are in favour of the euro.' סמסטר ב-ערן ישיב ' פרופ-2007אינטגרציה כלכלית ופיננסית והמשברים מאז

ט"תשע

A PROMISING FIRST DECADE• In line with expectations, the creation of the euro boosted intra-

eurozone capital flows. Cross- border claims of euro-area banks rose from below €1tn in 1998 to close to €10tn in 2008, according to the Bank for International Settlements.

• Data from the ECB shows that bank lending to other banks in the eurozone increased to about one quarter of all bank-to-bank lending in 2008. Bank lending to businesses in other eurozone countries increased to a peak of 5.3 per cent of all bank lending to businesses in March 2009.

43Intra-euro area trade more than doubled between 1999 and 2008,but it remains largely stable as a share of total trade largely because of rising trade flows with Asia.

CRISIS — AND A CHALLENGE TO SURVIVEWhen the euro-area crisis hit, capital flows were reversed as markets grew concerned about whether the eurozone would start to break up.

“Many investors reached the conclusion that the only way out for crisis-hit countries was for them to exit from it,” said Mario Draghi, president of the ECB, in May. “Fearing redenomination into lower-value currencies, investors sold off domestic assets”.

TODAY: A LARGE GAP BETWEEN RICH AND POOR

The recovery brought some convergence in inflation and interest rates — but this was less so in general economic and social terms, particularly among the old euro members.

Daniel Gros, director of CEPS, a European politics think-tank, showed in a recent paper that the newer eurozone members of central and eastern Europe have been catching up in terms of income per capita, but “the north has diverged from the south since the start of the financial crisis”.

UNFINISHED BUSINESSSince its creation, member states have taken many steps to improve the eurozone’s resilience to crises, including creating a banking union and capital market union. Yet both remain incomplete.

The lack of deeper financial integration leaves smaller banks largely exposed to their home economy — and prone to cut lending, hampering any recovery, during an economic downturn. “But if there are cross-border banks that operate in all parts of the union, they can offset any losses made in the recession-hit region with gains in another, and can continue to provide credit to sound borrowers” said Mr Draghiin May.

ורויה שוגו יפוריאה דוחיאהyashiv/eu_emu_april 7_2019.pdf · a promising first...

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