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"European case Study"
European case Study
Quentina Green
The building of a United Europe is undoubtedly one of the greatest historical undertakings of the 20th century. It is a process grounded in the positive values with which our civilization identifies – the preservation of peace, economic and social progress, respect for the person and the predominance of right over might – and, over nearly 50 years for which the process has been under way, there have been some moments of crisis but also major successes. Six countries originally rallied to the concept of a united Europe; now there are fifteen, while more than ten others feel drawn to towards the ideal and have applied to join the European Union.

The Birth of the European Monetary System

The economic crisis of the 1970s led to the first plans for a single currency. The system of fixed exchange rates attached to the US dollar was abandoned. European leaders agreed to create a "currency rope", tying together European currencies.

Maastricht Treaty

In December of 1991 the 15 members of the European Union, meeting in the Dutch town of Maastricht, agreed to set up a single currency as part of a drive towards Economic and Monetary Union. There were strict criteria for joining, including targets for inflation, interest rates and budget deficits. A European Central Bank was established to set interest rates. Price stability was identified as the paramount goal of the European Central Bank's monetary policy. To Enter the Euro-zone, a country must satisfy Convergence Criteria that are the following:

· Low inflation

· Low long-term interest rates

· Stable exchange rate

· Small budget deficit (less than 3% of GDP)

· National debt cannot exceed 60% of GDP

The analysis of our case centers around the following questions:

1,Why did members of the EC create the European Monetary System (EMS)?

The EMS was crated in 1979 to stabilize foreign exchange and counter...

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