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Intermediate Examination Paper from the year 2004 in the subject Economics - International Economic Relations, grade: A, University of Applied Sciences Essen (Institute for Economics and Management), language: English, abstract: In December 1991 at a summit in Maastricht the twelve nations, which constituted the European Community at that time, agreed on a treaty to transform the European Community into an European Union (EU). This Treaty was signed 1992 and came effective on November 1st of 1993 as an amendment to the treaty of Rome, the treaty the European Community was build on. Four years later the treaty of Amsterdam put the treaty of Maastricht into more concrete terms. The contracting parties agreed in Article B of this treaty that the Union will set itself (among others) the objective to promote economic and social progress through the establishment of an economicand monetary union (EMU), ultimately including a single currency. Under title V and VI of this treaty the countries also agreed to build up common, foreign- and security policies as well as to intensify their cooperation in fields of justice und home affairs. Title VII defines the ideas of a common economic and monetary policy. The treaty of Amsterdam was signed on October, 2nd 1997. Since all the Member States had to ratify the treaty by their respective legislative procedures, it did not come into effect until the end of May 1999. The European treaties, taken together, form the primary legislation and have characteristics of a constitution of the Community. The treaties provide the legal basis for all secondary legislation, i.e. regulations, directives and decisions of the institutions of the Community. 1 Peichl, Andreas (2003), p. 1-3. 2 Cowgill, Anthony and Andrew (2003b), p. 2.
The stability and growth pact imposes tight limits on government deficits and debts, but in the past year several large member states have breached the rules of the pact. The Commission proposed a series of reforms at the end of 2002. This report examines the reasons for the pact, and analyses the proposed reforms. The Committee advocates a flexible interpretation of the pact, and does not think the 3 per cent of GDP ceiling on deficits should be taken as an absolute limit. Any decision to implement sanctions should take account of the underlying economic situation. The Commission should have the power to issue early warnings directly to member states. Overall, the proposed reforms provide a good basis to achieve the necessary flexibility if they are interpreted as sound guidelines for member states to follow.
The Stability and Growth Pact (SGP) encompasses the legislative text and political resolutions regulating fiscal policy and public finances in EMU. The contributions in this volume analyse the institutional, legal, theoretical and empirical aspects of the SGP, examine its development and evaluate its main implications. The authors include academic economists, who provide insightful analysis, and policy makers who have contributed to the shaping of the pact and have a direct responsibility for its implementation. This book is the definitive source of reference on the SGP for academics, policy makes and economists.