European Monetary and Fiscal Policy

At the launch of the Euro, predictions about what has been dubbed"Euroland" were mixed. Supporters say the unprecented switch to a singlecurrency will benefit business and consumers alike. But critics warn that EMUis a giant leap into the unknown. The purpose of this book is to bring togetherthe available evidence to date about EMU, focusing on European monetary andfiscal policy.Sylvester Eijffinger and Jakob de Haan have produced a fresh andforward-looking account of the issues surrounding monetary integration. Theiranalysis includes the functions and goals of the European Central Bank, theTreaty on European Union, the Stability and Growth Pact, and the harmonizationof taxes. They go on to discuss the targets and instruments of European monetarypolicy, the relationships between the 'ins' and 'outs' within Europe, theintegration of European financial markets, and the competition between financialinstitutions in Europe. Finally, the international role of the Euro and futureof international policy co-ordination are investigated.The text has been presented for maximum clarity: each chapter concludes with asummary of the main issues, and case material and key topics are highlighted inboxes in order to help students focus on essential information. This thorough,innovative, and well-researched analysis has been carefully tailored to meet thecourse needs of undergraduate students of economic integration, Europeaneconomics, international economics, and European studies.

List of Figures

vii

List of Tables

viii

List of Boxes

x

List of Abbreviations

xi

Preface

xiii

Introduction

1

(2)

European Monetary Integration

3

(28)

Introduction

3

(1)

Origins of European Monetary Integration

4

(4)

The European Monetary System: Phases and Crises

8

(8)

The Costs and Benefits of a Monetary Union

16

(11)

The Transition to Economic and Monetary Union

27

(3)

Conclusion

30

(1)

EMU and the European (System of) Central Bank(s)

31

(23)

Introduction

31

(1)

The European (System of) Central Bank(s)

32

(6)

Central Bank Independence: The Rationale

38

(5)

Independence of the E(S)CB

43

(3)

Accountability of the E(S)CB

46

(6)

Conclusion

52

(2)

European Monetary Policy

54

(26)

Introduction

54

(1)

The Monetary Policy Strategy: Options

55

(6)

The Monetary Policy Strategy of the ECB

61

(5)

The Instruments of European Monetary Policy

66

(5)

The Relation between the `Ins' and the `Outs'

71

(3)

Banking Supervision

74

(4)

Conclusion

78

(2)

National Fiscal Policy in EMU

80

(27)

Introduction

80

(1)

The Need for Fiscal Rules in EMU

81

(6)

The Stability and Growth Pact

87

(8)

Harmonization of Taxes

95

(5)

Tax Competition

100

(6)

Conclusion

106

(1)

European Fiscal Policy

107

(32)

Introduction

107

(1)

The Budget of the European Union

108

(14)

Agenda 2000: Reform and New Member States

122

(5)

A European Stabilization Policy?

127

(10)

Conclusion

137

(2)

Financial Integration and Financial Market Structure

139

(26)

Introduction

139

(1)

The Integration of European Financial Markets

140

(6)

Financial Market Structure and Monetary Transmission

146

(9)

The New European Financial Landscape

155

(9)

Conclusion

164

(1)

EMU and International Policy Co-ordination

165

(17)

Introduction

165

(1)

The International Role of the Euro

165

(10)

Co-ordination of Exchange Rate Policies

175

(5)

Conclusion

180

(2)

References

182

(8)

Index

190

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European Monetary and Fiscal Policy

Summary

Table of Contents

Supplemental Materials