euro

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Euro revision notes

The Euro is the single European countries adopted by 18 out of 28 EU countries. The UK has not joined. The Euro involves: Common currency Common monetary policy – Eurozone interest rates set by the ECB in Brussels. Some fiscal rules, e.g. The Fiscal Compact (2012) limiting the amount of government borrowing (a balanced budget of less than 3% of GDP) The Euro is the second largest reserve currency in the world after the US Dollar. Benefits of the Euro Lower transaction costs for trade, tourism and consumers. Greater price transparency (leading to more price competition and…

Causes of Europe’s deflation problem

Causes of Europe’s deflation problem

The European Union is facing the prospect of a serious bout of deflation (or at least, very low rates of inflation / disinflation) Deflation occurs when prices fall. But, very low rates of inflation are considered to raise problems associated with deflation. In the Eurozone, the main index of inflation has fallen to 0.7% –  This is well below the ECB’s inflation target of 2%. Some regions and countries in the Euro, such as Greece are already experiencing deflation. In Greece prices fell 1.8% last year and the consumer…

EU success or crisis?

EU success or crisis?

The German Finance Minister Wolgang Schauble has been a strong advocate of austerity, supply side reforms and ‘sound money’ policies. (i.e. sticking rigidly to inflation targets). Generally, this has been the preferred approach of Europe to the ongoing debt crisis and recession of the past few years. Recently, he has claimed that the European economy is recovering well and this is vindication that the broad approach of fiscal discipline and structural reforms are laying a foundation for strong economic growth in the future. Writing in the Financial Times, Schauble states:

Latvia to join the Euro

Latvia to join the Euro

After enduring a deep economic crisis, Latvia are poised to be ‘rewarded’ with membership of the Euro in 2014. The Latvian miracle story It seems a strange that countries are so keen to join the Euro, when membership of the Euro has been a major factor in creating a real depression amongst many Euro countries. Yet, the debate about Latvian joining seems to be from a parallel universe, where the ongoing crisis is neatly forgotten. Prime Minister Valdis Dombrovskis said that the European…

If the UK had been in the Euro – how would it affect the economy?

If the UK had been in the Euro – how would it affect the economy?

Readers Question: my question is If the UK. had joined the Euro back when it first started would the UK. have benefited like Germany or would we be in the same situation as Greece, Italy, and Spain? If the UK had joined the Euro from the start in 1999, the UK economy would definitely have been affected in a variety of ways. Firstly, in the Euro we would have a fixed exchange rate, no independent monetary policy, fiscal policy would be severely curtailed, and the UK bond market would have…

Is a strong currency a good thing?

Is a strong currency a good thing?

Readers Comment from post: Should the UK join the Eurozone So now it is 2013. Britain has spent a number of years with it’s interest rate set at just about zero, has entered a triple recession, has lost it’s AAA credit rating and Sterling is only worth €1.15 a drop of over 30% against the Euro. So for those who still cannot see the wood for the trees and still believe the “anti-euro” propaganda wake up and smell the coffee. I will put it this…

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Should the UK stay in the European Union?

In the past few years, there have been a noticeable increase in the calls for the UK to consider leaving the European Union. A few years ago, we may have enjoyed complaining about EU directives on the bendy banana (which didn’t really exist) but it was taken as almost sacrosanct that membership of the EU was in the UK’s interest. What has changed and would we really benefit from leaving – and negotiating a free trade agreement, which enables the benefits of EU membership without the supposed costs? Should We stay…