Many well-known economists argue to achieve a prospering economy; it is crucially important to have an efficient collaboration between a country’s monetary policy, concerning a stable currency and inflation rate, as well as a proper fiscal policy, including structural reforms and governmental spendings.
In the backdrop of this opinion, the European Monetary Union (EMU) was established in 1999, in which the monetary policy for several countries is centralised in one institution, the European Central Bank (ECB). This is a massive achievement, as for most of Europe’s history, it has been at war with itself, which did not foster any trade or other kinds of economic co-operation. Europe was always a continent of trade barriers, tariffs and different currencies. Therefore, doing business across borders was always highly sluggish, and in the light of all these obstacles, it tended to stifle economic growth. After World War II has left Europe in a devastating condition, the natural choice to rebuild the continent was to remove these ancient barriers. By implementing the Euro in 1999, this went even a step further. Domestic currencies ended to exist as well as the very individual monetary policies. In consequence the national central banks shifted the control to the newly formed ECB. The Eurozone had now one unified monetary policy, but still many different fiscal policies in the respective member states. Before the Euro was born, countries like Greece or Italy not only had to pay high interest rates to borrow money, they also could only lend a limited amount, as lenders were not comfortable providing them too many credits. However, as they became members of the European Monetary Union, the tables turned, because big security providers, like Germany, were now part of it.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- The choice between monetary and fiscal policy
- Historical development
- Evolving monetary policy and its duties
- ECB-guardian of the price stability
- Effectiveness and developments until the crisis
- Imbalances in the Eurozone
- A divided union
- Spain's situtation before the crisis
- Germany's situtation before the crisis
- Specific imbalances between Spain and Germany
- Monetary policy reaction to the crisis
- Fixed-rate full-allotment procedure
- Covered Bond Purchase Program
- Security Market Programme
- Outright Monetary Transactions
- Asset Purchase Programme
- Asymmetric reactions to the crisis
- Reforms and measures in Spain
- Financial market reforms
- Fiscal measures
- Labor market reforms
- Germany's reaction to the crisis
- Reforms and measures in Spain
- The ECB a controversial political actor
- Influencing politics in the EMU
- Influencing the ECB's decisions
- Breach of the law or necessary measure?
- Interplay between monetary and fiscal policy
- (Missing) structural reforms prior to the crisis
- Lost incentives?
- Structural Reforms - a 'convenient myth'?
- Germany - driver or stability anchor in the crisis
- Ways out of the crisis
- Alternatives
- Concluding remarks
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis examines the intricate relationship between monetary policy and structural reforms within the framework of the European Monetary Union (EMU), particularly in the context of the Eurozone crisis. The author seeks to analyze the effectiveness of monetary policy in addressing the crisis, while considering the influence of (missing) structural reforms on both the crisis's emergence and its resolution.
- The interplay between monetary policy and structural reforms in the Eurozone
- The impact of missing structural reforms on the Eurozone crisis
- The role of the ECB in influencing politics and economic policies in the EMU
- The effectiveness of monetary policy in addressing the Eurozone crisis
- The potential for alternative solutions to the Eurozone crisis
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter introduces the topic of the thesis, outlining the importance of the interaction between monetary policy and structural reforms in achieving economic prosperity. It highlights the establishment of the European Monetary Union (EMU) and the central role of the European Central Bank (ECB) in managing monetary policy for the Eurozone. The chapter also delves into the historical context of the Eurozone, emphasizing its unique characteristics and challenges.
- The choice between monetary and fiscal policy: This chapter provides a comprehensive overview of the theoretical underpinnings of monetary and fiscal policy. It explores the historical development of monetary policy, its evolving duties, and the ECB's role as a guardian of price stability. The chapter also analyzes the effectiveness and limitations of monetary policy before the Eurozone crisis.
- Imbalances in the Eurozone: This chapter examines the economic imbalances that developed within the Eurozone prior to the crisis. It explores the specific situations of Spain and Germany, highlighting their differing economic structures and policies. The chapter also analyzes the specific imbalances between these two countries, focusing on factors such as public debt, current account balances, and labor market conditions.
- Monetary policy reaction to the crisis: This chapter delves into the ECB's response to the Eurozone crisis. It explores the various monetary policy measures implemented, including fixed-rate full-allotment procedures, covered bond purchase programs, and outright monetary transactions. The chapter analyzes the rationale behind these measures and their impact on the Eurozone economy.
- Asymmetric reactions to the crisis: This chapter examines the divergent responses of Spain and Germany to the Eurozone crisis. It analyzes the reforms and measures implemented by Spain, focusing on financial market reforms, fiscal measures, and labor market reforms. The chapter also analyzes Germany's reaction to the crisis, highlighting its economic stability and its approach to supporting the Eurozone.
- The ECB a controversial political actor: This chapter examines the role of the ECB as a political actor within the EMU. It explores the ECB's influence on politics in the EMU, its decision-making processes, and the potential for political influence to shape its decisions. The chapter also examines the controversy surrounding the ECB's actions, particularly in relation to allegations of overstepping its mandate.
- Interplay between monetary and fiscal policy: This chapter analyzes the interaction between monetary and fiscal policy in the context of the Eurozone crisis. It explores the impact of missing structural reforms on the crisis, examining the potential for lost incentives and the controversy surrounding the concept of structural reforms. The chapter also considers the role of Germany in the crisis, analyzing whether it acted as a driver of stability or a potential obstacle to resolution. Finally, the chapter discusses potential ways out of the crisis and explores alternative solutions.
Schlüsselwörter (Keywords)
This thesis revolves around the interplay between monetary policy and structural reforms within the European Monetary Union (EMU), focusing on the Eurozone crisis and its aftermath. Key terms include the European Central Bank (ECB), monetary policy, fiscal policy, structural reforms, economic imbalances, sovereign debt crisis, and the impact of the crisis on member states like Spain and Germany.
- Quote paper
- Philipp Huber (Author), 2018, The interplay between (missing) structural reforms and monetary policy, Munich, GRIN Verlag, https://www.grin.com/document/494250
