ECO 120 Study Guide - Final Guide: Maastricht Treaty, European Exchange Rate Mechanism, European Central Bank
Document Summary
Included a set of institutional preconditions for participation among ec members, notably the requirement that national central banks be made politically independent of their government. Led to the creation of the single european currency (euro) Laid out glide path to monetary union: 3 stage transition during which there would be a convergence of policies and institutions. Stage 1: bring national economic policies into line, remove remaining capital controls and reinforce independence of central banks. Stage 2: further convergence of policies, creation of emi. Stage 3: monetary union would not be delayed further than 1999. Many amendments made - make it closer to citizens. Not all countries would follow all revisions. The policies were so successful, it created drafts for the treaty of amsterdam and nice. Benefits of the euro: no exchange fee for currencies, easier to compare prices and trade, eliminates exchange rate uncertainty, helps keep inflation low (interests rate low bc of strong currency)
