Here is a video recording of an A-level economics revision webinar on aspects of European Monetary Union.
- Monetary union is a deeper form of integration
- The single European currency, the euro, was introduced in 1999 and came into common circulation in January 2002
- No country has yet left the Euro Area
- As of May 2017, there are nineteen member nations
- Of the 28 EU countries (the UK leaves in 2019), 9 are not part of the single currency including Denmark, Hungary, the Czech Republic and Poland
Key problems facing the Euro Area economy
- High structural unemployment + hysteresis effects
- High levels of government debt + high bond yields for some
- Risks from price deflation
- Persistently low aggregate demand / spare capacity
- Fragile banking sector (non-performing loans)
- Weak capital investment – some diverting to emerging Asia
- Big trade / current account imbalances
- Political tensions and ongoing refugee crisis
- Declines in subjective wellbeing + rise in poverty
Where next for the Euro Area?
- Politics takes centre stage in 2017 (Austria, Holland, France and Germany all have key elections)
- Euro Area is showing stronger (cyclical) growth and falling unemployment with a reduced risk of deflation
- Is this enough for countries to climb out of the debt crisis?
- Banking systems remain fragile (especially in Italy)
- Eurozone’s periphery is still in deep crisis
- Need for structural economic reforms remains
- Changing centre of global economic gravity is accelerating
- Big risk is that hysteresis effects of collapse in investment, structural unemployment and impact of rising inequalities and socio-economic insecurity will damage Europe’s trend growth and the potential to raise living standards.
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