Download European States and the Euro: Europeanization, Variation, by Kenneth Dyson PDF

By Kenneth Dyson

With the advent of euro notes and cash in 2002 and the chance of a united kingdom referendum at the unmarried forex, questions about how fiscal and financial Union is affecting ecu states will come ever toward the centre of political debate correct throughout Europe. This ground-breaking publication brings jointly major specialists within the box to envision the character of the results of the euro on ecu member states.

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Suffice it to say here that changes in monetary policy are likely to have an influence on the exchange rate, and vice versa: the two policy domains must be viewed as interdependent. But institutional responsibility for the determination of exchange-rate policy objectives is far less clear in the Treaty. Article 105 para. 2 states that foreign-exchange operations are the responsibility of the ECB. This makes sense in that, if intervention is to take place, the ECB is the obvious institution to carry this out and the obvious vehicle through which tensions between exchange-rate targets and monetary policy goals can be coordinated.

Some of these policy dilemmas are simply inherent in the complexity of governance in the global monetary and financial system under conditions of capital mobility. But it has long been argued in the literature that the entire EU project should be understood more in terms of what it is becoming than of what it is at any one time. If political agreement fails in this regard, the future of the single currency will be a difficult one. For now, it is to be hoped that at least within the Euro-Zone and EU-rs the 'stability culture' will be successfully embedded in corporate and government practice so as to prevent the restructuring process from disrupting the idea of the EU itself.

Second, the reserves of the ECB will be much larger than those of any one member state in the past. The ECB will have a very substantial buffer against market movements in and out of the currency. If there is cooperation with the US and Japan, it should be possible to moderate market reactions. This larger buffer will be no substitute for 'prudent' macroeconomic policies in line with market expectations about economic fundamentals, but the buffer should help. In short, size is a help, but only if deployed sparingly and strategically.

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