European integration and the ‘euro project’

This chapter examines the extent to which the euro – which was introduced as a ‘virtual’ currency in January 1999 and then as a ‘real’ currency in January 2002 – has been successful. The effective countdown to the single currency started with the signing of the Maastricht Treaty. The convergence criteria, which were to determine whether a national currency would join the single currency, provide some insights into the nature of the euro project and are discussed. Also discussed is the introduction of the euro, which was accompanied by the adoption of the Stability and Growth Pact (SGP) with its constraints on fiscal policy. The ordo-liberal nature of the European Monetary Union (EMU) and its policy framework constitute important contributions to the neo-liberal theoretical and policy framework and are discussed in the chapter. This is followed by some reflections on the impact of the framework on inflation and unemployment. This chapter concludes with a discussion of the relatively poor economic performance under the euro and the major issues that are now emerging.