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The Economic and Monetary Union: Current and Future Prospects

Author

Listed:
  • Philip Arestis

    (University of East London and University of Leeds)

  • Malcolm Sawyer

    (The Jerome Levy Economics Institute of Bard College)

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.

Suggested Citation

  • Philip Arestis & Malcolm Sawyer, 2000. "The Economic and Monetary Union: Current and Future Prospects," Macroeconomics 0004029, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0004029
    Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 37; figures: included
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    References listed on IDEAS

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    Cited by:

    1. Arestis, Philip & McCauley, Kevin & Sawyer, Malcolm, 2001. "An Alternative Stability Pact for the European Union," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(1), pages 113-130, January.
    2. Philip Arestis & Malcolm Sawyer, 2001. "Will the Euro Bring Economic Crisis to Europe?," Palgrave Macmillan Books, in: Philip Arestis & Michelle Baddeley & John McCombie (ed.), What Global Economic Crisis?, chapter 5, pages 78-103, Palgrave Macmillan.

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