The Challenge of the Early Years
Edited by Marco Buti and André Sapir
Chapter 16: EMU – The First 10 Years: Challenges to the Sustainability and Price Stability of the Euro Area – What Does History Tell Us?
16. EMU – the ﬁrst 10 years: challenges to the sustainability and price stability of the euro area – what does history tell us? Lars Jonung 1. INTRODUCTION1 The creation of the EMU and the euro is a unique event. Never before has a group of independent nation states given up their national currencies to form a common monetary union based on a new unit of account under the leadership of a common monetary authority – while still retaining political independence. Economic policies – except for monetary policy – will primarily be framed by the individual Member States or by coordination through a system of persuasion, peer pressure and procedures presently being set in motion. EMU is thus a gigantic experiment with no precedence in monetary history. EMU will have eﬀects on practically every area of economic policy making in Europe: it will inﬂuence the allocation of resources, the distribution of income, stability and growth, as well as the formal and informal institutions on labour, product and ﬁnancial markets within the euro area. EMU will most likely aﬀect Europe’s economic and political landscape in the future in fundamental, but as yet, unknown ways. In short, monetary history is presently in the making in Europe. The euro, the newborn currency, will face a number of challenges during the ﬁrst decade of the 21st century. The purpose of this report is to focus on two such challenges: ﬁrst, the endurance prospects for the euro, and second, the inﬂation performance of the euro area...
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