1.1 Managing the European economy after the introduction of the Euro
In many ways the introduction of the Euro both begged the question of an integrated financial system for Europe (or the Euro-zone in the first instance) and was stimulated by its own success. This success can be measured in terms of a relatively low-inflation economy and, after a shaky start, the Euro's emergence as an international currency of some repute. Thus one of the first issues to deal with in this course is the background to the institutional changes that Economic and Monetary Union (EMU) has occasioned and benefited from. The key institutional development here is the creation of the European Central Bank (ECB) and how it has gone about conducting monetary policy; this is considered in Section 1 3. But monetary policy cannot be properly dealt with without at the same time considering the trajectory of fiscal policy, which is considered in SubSection 1.4.1 in connection with the fate of the Stability and Growth Pact (SGP).
Of course, the Euro is not only a common currency for the Euro-zone but it is also a major international currency. The characteristic's of the Euro's role as an international currency are considered in Section 5. Connected to this are issues thrown up for the monetary and financial future of Europe by the expansion of the EU from fifteen member states to twenty-five in May 2004, and the further possible enlargement to come; these issues are considered in SubSection 1.6.1. Finally, some of the remaining political consequences of the development of the Euro in the context of EU economic policy making, and the future direction of Europe as a whole, are dealt with in .
But before all of this, it is useful to remind ourselves of the importance of the EU in the international context relative to other main potential competitor economies and zones. This is the object of SubSection 1.2.1.