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The Economic and Monetary Union: Current and Future Prospects


Philip Arestis


University of Cambridge - Department of Land Economy

Malcolm C. Sawyer


Levy Economics Institute; University of Leeds - Leeds University Business School (LUBS)

October 1999

The Jerome Levy Economics Institute Working Paper No. 282

Abstract:     
The euro was adopted as legal tender, albeit in a virtual form, by 11 countries of the European Union on January 1, 1999, with the intention that notes and coins denominated in euros would be introduced and the national currencies would be phased out during the first six months of that year and that the euro would be fully operational by 2002. This paper first reviews the current position of the EMU member states in relation to the convergence criteria under the Maastricht Treaty and finds that there must have been a considerable degree of "fudge" for the criteria to have been met. The paper next looks at the central role of aggregate demand in the EMU and at concerns about unemployment. It next examines the prospects of the current EMU arrangements, concluding that they are highly deflationary. To overcome the deflationary bias of current proposals and as a means to alleviate the serious unemployment problem, the authors recommend that the European Central Bank be enhanced by (1) the development of a new institution, the European Union Development Bank, and (2) a modification of the Stability and Growth Pact.

Number of Pages in PDF File: 15

JEL Classification: F33, F42

working papers series


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Date posted: January 5, 2000  

Suggested Citation

Arestis, Philip and Sawyer, Malcolm C., The Economic and Monetary Union: Current and Future Prospects (October 1999). The Jerome Levy Economics Institute Working Paper No. 282. Available at SSRN: http://ssrn.com/abstract=193508 or http://dx.doi.org/10.2139/ssrn.193508

Contact Information

Philip Arestis (Contact Author)
University of Cambridge - Department of Land Economy ( email )
19 Silver Street
Cambridge, CB3 9EP
United Kingdom
Malcolm C. Sawyer
Levy Economics Institute
Blithewood
Annandale-on-Hudson, NY 12504-5000
United States
845-758-7700 (Phone)
845-758-1149 (Fax)
University of Leeds - Leeds University Business School (LUBS) ( email )
Leeds LS2 9JT
United Kingdom
+44-113-233-4484 (Phone)
+44-113-233-4465 (Fax)
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