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Flashcards in Euro Deck (21)
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1
Q

Benefits of the monetary union

• stability

A

Monetary stability: countries can no longer engage in competitive

2
Q

Benefits of the monetary union

• Price transparency

A

Greater price transparency, promoting competition and reducing the cost of living

3
Q

Benefits of the monetary union

• Convenience

A

Greater convenience for travellers and reduced transaction costs for both tourist and businesses as a result of not having to change currencies

4
Q

Benefits of the monetary union

• Strengthening business

A

The strengthening of European businesses which, having to compete in a single currency area, have become more robust competitors on the world stage

5
Q

What is the benefit of the Growth and Stability Pact

A

it discourages governments from destabilising the Eurozone by borrowing money to win elections and instead encourage them to think about long-term stability

6
Q

Eurozone need to keep their annual budget deficit

A

All countries in the Eurozone should aim to keep their annual budget deficit below 3% of GDP, and keep total public debt below 60% of GDP.

7
Q

The Commission’s power in breaking the rules in the SGP

A

The Commission could impose a fine of up to 0.5% of GDP if a country broke the rules in three consecutive years.

8
Q

Examples of breaches of the SGP

A

France and Germany broke the rules in 2003.

Greece was told to cut its public spending and raise taxes in order to repay its debt.

9
Q

Disadvantage of the SGP

A
  1. New rules do not take account of the flexibility governments need occasionally to balance their budgets across the economic cycle
10
Q

Ireland bailout in 2010

A

An €85 billion bailout package was agreed for Ireland in 2010

11
Q

What is the European Stability Mechanism

A

It is the eurozone’s permanent bailout fund for struggling economies like Greece. Aimed to defend against a deepening debt crisis. Financed by all 19 member states

12
Q

What does the European Stability Mechanism provide?

A

It provides financial assistance in the form of loans, to Eurozone countries or as new capital to banks in difficulty.

13
Q

The UK’s role in bailouts

A

The UK contributed to the bailouts of Ireland and Portugal, and
has a bilateral contribution in the case of the Republic of Ireland.

14
Q

Arguments for fiscal union

• joined-up management

A

A European fiscal union, with proper institution would be able to provide joined-up management of the EU economy as a whole

15
Q

Arguments for fiscal union

• Central tax

A

Central tax resources and mutualised debt would become powerful symbols of a united Europe

16
Q

Arguments for fiscal union

• credibility

A

Fiscal union would raise Europe’s market credibility

17
Q

Arguments for fiscal union

• Debt crisis

A

The European debt crisis proves that monetary union cannot work without fiscal union

18
Q

Arguments against fiscal union

• Lack flexibility

A

Governments need flexibility to deal with their own problems

19
Q

Arguments against fiscal union

• sovereignty

A

Setting budgets is a core responsibility of sovereign parliaments (democratic deficit

20
Q

What does not using the euro mean for the UK

• Budget deficit

A

The UK is allowed to run a much higher budget deficit than other member states, as it is not subject to the stability and Growth Pact, which caps public deficits at 3% of GDP

21
Q

Decisions made by the ECB

A

The UK is unbound by decisions made by the European Bank or the European System of Central Banks