faliing of euro

1. EMU, the Euro, and the Current Economic Situation in the Euro Area Presentation by BABASAB PATIL

6. What is EMU?

9. What are the three parts of EMU? 1) The euro – countries give up their own currency when they join the euro area. The ECB sets interest rates for the euro area (16) 2) The single market – all countries participate in the single market, with free movement of goods, services, capital and people (27) 3) Enhanced policy coordination – countries retain sovereignty over other economic policies but commit to coordinate more closely at the European level (27/16)

16. Economic policy in EMU Single monetary policy set by the ECB Fiscal and other policies set by Member States (but subject to common rules)

17. Economic policy making - the euro area and the US Monetary policy Federal Reserve Chairman Ben S. Bernanke ECB President Jean-Claude Trichet Fiscal policy Treasury Secretary Timothy Geithner Economic policy co-ordination more difficult? Eurogroup Finance Ministers

19. The Euro Area Economic Situation: Not Good! Source: European Commission Spring Forecast May 2009 Real annual % change unless otherwise stated 2008 2009 2010 Real GDP growth 0.8 -4.0 -0.1 Inflation 3.3 0.4 1.2 Unemployment rate (percentage of labor force) 7.5 9.9 11.5

21. Europe’s response to the crisis The ECB reduces interest rates to historically low levels (1.25%) and begun “quantitative easing” Dec 08: EU governments adopt European Economic Recovery Plan - a coordinated fiscal stimulus Oct 08: euro area governments adopt concerted action plan to support their financial systems

22. The financial crisis: Other ways Europe should respond? Speed up economic reforms (Lisbon Strategy) http://ec.europa.eu/growthandjobs/index_en.htm Make the single market work better (especially for Services)