If the European economy is to achieve the objectives set out for it by the European Commission in 1998 (Ciminero & Vietor 1), then soaring deficits must be controlled and the trajectory of the euro must be gingerly handled.
Growth and employment, contingent now as ever upon flexible markets and improved manufacturing and service sector performance, must not overlook recent trends concerning the Stability Pact and the euro-zone. The pressing economic issues facing the European Monetary Union (EMU) have exceeded those anticipated for it five years ago. This need not bode ill for the EU single currency market, as most of these issues can be easily cast in a favorable light. Prudent economic policy must naturally envisage the future with an eye trained also upon the past if the objectives established at the outset of the European Economic Integration process are to be met.
The Maastrict Treaty (as surveyed in Sabina A. Ciminero and Richard H.K. VietorÆs 1999 case analysis entitled: ôEuropean Monetary Unionö) established a clear timetable for achieving monetary union in Europe; five convergence requirements were laid out as a criteria for inclusion in the single currency market. Price Stability, Interest Rates, Deficits, Debt and Currency Stability comprised this list; two of the requirements built into these provisions insisted that ônational budget deficits must not exceed 3% of GDPö and ôA currency must not have been devalued in the previous two years and should have remained within normal fluctuation bandàof its central parity rate in the exchange rate mechanism" (6).
By 1997, the Stability and Growth Pact had been introduced to help the EMU maintain the fiscal standard it had set for itself in Maastrict in 1991. The Pact reinforced the idea that no EMU participant nations may allow their deficits to exceed 3% of Gross Domestic Product (GDP). Fines and sanctions would be brought to bear on nations that failed ...