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 MACRO ECONOMICS
Euro Turns 20: Lessons from Two Decades of Single Currency System

Submitted to

Dr. Venkatraja B
Date-10/03/2020

Submitted by

Group-C6

19151 NARESH HOLLA N

19152 NIDHILKRISHNA P NAIR

19153 NISHAN N

19154 NIVEDITHA S

19155 PARTH PANDYA

Summary
1
The 20th anniversary of Economic and Monetary Union (EMU) offers an opportunity to look
back on the ECB’s monetary policy strategy and learn lessons that can improve the conduct of
policy in the future. Our “Tale of Two Decades” is intended to contribute to this endeavour. It
is largely a tale of “two regimes”: one – stretching slightly beyond the ECB’s mid-point –
marked by decent growth in real incomes and a distribution of shocks to inflation almost
universally to the upside; and the second – starting well into the post-Lehman period –
characterised by endemic instability and crisis, with the distribution of shocks eventually
2
switching from inflationary to continuously disinflationary. One of the elements that has
defined the ECB’s monetary policy strategy during this period is its characteristic definition of
price stability, and it is around this definition that we primarily focus our two decade/two-
regime story. In 1998, the Governing Council formulated an objective that consciously differed
from the standard inflation targeting framework practised by some prominent central banks at
the time. Rather than expressing a preference for a particular rate of inflation (and
communicating an inflation target reflecting that preference), it opted for announcing a
description of a state of affairs that, in its assessment, would qualify price stability almost
unconditionally: year-on-year positive inflation rates below 2%. In May 2003, the Governing
Council confirmed the 1998 price stability definition but put forward the new concept of a
“policy aim”. This specified that not all inflation rates below 2% were equally desirable, but
rather that policy would seek to deliver an inflation rate “close to 2%” over the medium term.
3
This decision provided a neat compass to calibrate policy, which in fact turned out to be critical
amidst the macroeconomic dislocations and deflationary pressures that followed the financial
crisis. Furthermore, we show that the 2% ceiling functioned as a key shock-absorber in the
relatively high inflation years prior to the crisis. Anytime inflation tended to exceed that limit,
expectations would adjust in a stabilising direction, as agents internalised a vigorous response
of the ECB to those inflation overruns. Accordingly, prior to the crisis, repeated cost-push
shocks triggered a sharp revision to interest rate expectations, but a muted reaction in inflation
expectations and in realised inflation. This self-stabilising mechanism ensured that actual
policy changes could be relatively moderate. A key part of our narrative, however, is that the
same mechanism could not be counted upon to act as a buffer in the face of disinflation. As the
economy entered a second regime where negative demand shocks came to dominate, the 2%
ceiling ceased to bind and offered a softer defence against downside risks to price stability.
Agents started expecting a weaker monetary policy response – as the room for conventional

1
rate adjustments was eroding – and revised down their inflation expectations as a result. The
switch to the “second regime” was not immediately apparent: headline inflation recovered
quickly after the Lehman crash and stayed elevated for four years thereafter. In those
conditions, and despite stubborn inflation pressures, the ECB’s reaction to the post-Lehman
meltdown was courageous and forestalled a deeper contraction than was observed. ECB
Working Paper Series No 2346 / December 2019 2 But, as disinflationary forces gathered
strength, the ECB’s framework had to evolve: from an approach based on “separation” – with
rate policy and liquidity provision independently assigned to different risks – to “combination”
– where liquidity provision was used to reinforce rate policy and rate guidance; and from
“passively” providing liquidity by responding elastically to banks’ demand, to seeking to ease
the stance by “actively” deploying the central bank’s balance sheet. The shift towards a holistic
policy strategy began already with the introduction of the Securities Markets Programme
(SMP) in 2010 and the Outright Monetary Transactions (OMT) programme in 2012. It
culminated, from mid-2014 onwards, in the launch of a “combined arms” approach comprising
three main elements: the introduction of a negative interest-rate policy (NIRP); a series of
targeted long-term refinancing operations (TLTROs); and a large-scale Asset Purchase
Programme (APP) encompassing public and private sector securities. In due time, forward
1
guidance (FG) on the size and duration of the APP and, subsequently, on the likely outlook for
policy rates was added to the package to facilitate coordination of investors’ expectations in
the market. The extent to which these innovative instruments might have reinforced the
economic recovery, and accelerated inflation normalisation, consequently, remains a subject
4
of active discussion among researchers and policymakers. This paper contributes to the debate
3
with novel quantitative results. Our main contribution is in trying to tease apart the effects of
the NIRP, the APP and FG on financial conditions, growth and inflation. We find that, in the
absence of the package, GDP would have been at least 2.7% lower by end-2018, and annual
inflation one third of a percentage point weaker on average over 2015-2018. Around a fifth of
the overall impact on the 2017 (i.e. the peak year) growth rate is attributable to the NIRP as a
standalone instrument, a surprisingly elevated contribution given the contained size of the
cumulated rate adjustments in negative territory (only a 40 basis point cut spread over an
interval of two years). Our estimates show that the APP explains the lion’s share of the overall
effect on output growth in 2017. TLTROs, for their part, have led to a persistent compression
in lending rates and enduring support to the economy, accounting for another fifth of the overall
5
impact on output growth in 2017. Was the balance between the benefits of the measures for the
3
economy and their potential costs always positive? We measure the costs in terms of banks’
2
ability to generate income and capital buffers organically. On that score, we confirm that,
throughout the period covered by our chronicle, the all-in general equilibrium advantages of
the strategy have consistently outstripped any adverse effect that banks might have had to
endure because of the extraordinarily challenging low-rate environment. We do not find
evidence that, at least over the period covered, the negative rate environment might have
pushed the banks to the tipping point where they would start reacting to the easiness of
monetary policy by restricting, rather than expanding credit to the economy. However, one can
certainly imagine scenarios in which macroeconomic prospects are downgraded – the “neutral
rate” falls – to the point where risk adjusted returns from lending fail to keep up, even as the
central bank eases policy further, and thus financial stability vulnerabilities emerge.

3
Contents

Introduction .........................................................................................................5
Impact analysis ..................................................................................................14
Conclusio n .........................................................................................................15
Reference- ..........................................................................................................16

4
Introduction
1
The first 20 years of the euro have been very different from many anticipated, highlighting the
importance of understanding that the future is likely to be different from the past. In view of
this, only a commitment to flexibility and a willingness to respond to new challenges can ensure
the continued success of the common currency. Twenty years ago, the euro was born this
3
month. Little has changed for ordinary citizens until the introduction of cash euros in 2002. But
1
in January 1999, the "third stage" of the Economic and Monetary Union officially began, with
3
exchange rates "irrevocably" set between the original 11euro area Member States and the
authority over their monetary policy transferred to the new European Central Bank. In 1999,
conventional wisdom concluded that Germany would suffer the greatest losses from the
introduction of the euro. Beyond the possibility that the ECB would not be as strict on inflation
as the Bundesbank had been, the Deutsche Mark was overvalued, with Germany running a
current-account deficit. Fixing the exchange rate at that point, it was assumed, would pose a
serious challenge to German’s competitiveness. But, 20 years on, inflation is even lower than
it was when the Bundesbank was in power, and Germany retains persistently large current-
account surpluses, which are evidence that the German industry is too competitive. This takes
us to the first lesson of the last 20 years: the success of individual eurozone countries is not
pre-ordained.

The experiences of other countries, such as Spain and Ireland, reinforce that lesson,
demonstrating that the ability to adapt to changing circumstances and a willingness to make
painful choices matter more than the economy's starting position. This applies to the future as
well: Germany's current predominance, for example, is in no way guaranteed to continue for
the next 20 years. Yet the development of the eurozone has been backward-looking. High and
unpredictable inflation, mostly powered by double-digit wage growth, was the main concern
in the 1970s and 1980s. Financial crises were almost always related to inflation, but historically
limited in scope, as financial markets were smaller and not deeply inter linked. With the
formation of the eurozone, everything has changed. Wage levels have declined throughout the
1
developed world. But financial market activity, particularly across borders within the euro area,
3
grew exponentially, having been repressed for decades. For example, euro area member
countries ' cross-border assets, mostly in the form of banks and other loans, grew from around
100 percent of GDP in the late 1990s.

5
Then, ten years ago, the global financial crisis exploded, throwing Europe off balance. The fir
st deflationary recession since the 1930s was made especially virulent in Europe by the moun
tain of debt that had accrued over the last ten years, when countries had their eyes on the rear-
6
view mirror. Of course, the eurozone was not alone to be surprised by the financial crisis that
started in the United States with supposedly secure subprime mortgage-based securities. But
the US, with its cohesive financial (and political) structure, has been able to overcome the crisis
relatively quickly, while a slow-moving crisis spiral has struck other member states in the
eurozone. Fortunately, the ECB has proven to be robust. The leadership acknowledged the need
to shift the focus from battling inflation–the ECB's goal of achieving –to curbing deflation. At
3
the end of the day, the euro persisted because, when the pressure came to the fore, eurozone
leaders invested political capital to enact the necessary reforms–even though they blamed the
euro for their country's problems. This pattern of demonizing the euro before recognizing the
need to protect it continues to unfold today–and should serve as the second lesson of the last
1
20 years. Italy's populist coalition government spoke bravely about flouting the rules of the
euro, with some advocating a complete exit from the eurozone. But when the financial market
risk award increased, and Italian savers did not buy their own government’s bonds, the coalition
quickly changed its tune.
6
In reality, the economic performance of the eurozone was not as grim as the seemingly endles
s stream of somber headlines suggests. In the last 20 years, per capita GDP growth has slowe
d, but not more so than in the US or other developed economies.

6
Image: Eurostat

Likewise, mainland European work markets have encountered under-revealed basic change,
with the interest pace of the work power rising every year, in any event, during the emergency.
7
Today, a higher extent of the grown-up populace is monetarily dynamic in the eurozone than
in the US. Work has arrived at record levels, and joblessness in some southern nations, however
still high, is emergency Such monetary real factors imply that it is generally perceived as an
essential part of European coordination, regardless of whether the euro isn't particularly
3
generally welcomed. As indicated by the new Eurobarometer survey, support for the euro is at
an untouched high of 74 percent, despite the fact that it is restricted by under 20 percent of the
1
number of inhabitants in the euro region. Additionally, Italy flaunts a solid genius euro vote
(68% versus 18%). Here's a third essential exercise from the euro's initial two decades: in spite
of its numerous defects, the regular money has conveyed occupations, and there is little help
for surrendering it. Be that as it may, the most significant exercise is likely another where. The
3
initial 20 years of the euro have turned out uniquely in contrast to many anticipated, underlining
the significance of understanding that what's to come is probably going to be not quite the same
as the past. Just a guarantee to adaptability and a readiness to confront new hindrances can
guarantee proceeded with accomplishment of the basic cash.

7
When the EU was founded in 1957, the Member States concentrated on building a 'common
8 1
market' for trade. However, over time it became clear that closer economic and monetary co-
operation was needed for the internal market to develop and flourish further, and for the whole
European economy to perform better, bringing more jobs and greater prosperity for Europeans.
In 1991, the Member States approved the Treaty on European Union (the Maastricht Treaty),
deciding that Europe would have a strong and stable currency for the 21st century.
9
Countries That Use the Euro

There are 23 countries that use the euro as of 2018. The eurozone consists of 19 members who
are EU members and use the euro.10 They are Austria, Belgium, Cyprus, Estonia, Finland,
France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the
Netherlands, Portugal, Slovakia, Slovenia, and Spain. The non-EU countries are Andorra,
Vatican City, and Monaco and San Marino.

Fourteen African nations peg their currency to the euro.12 They are former French colonies
that adopted the CFA franc when France switched to the euro.13 They are Benin, Burkina Faso,
Cameroon, Central African Republic, Chad, Republic of Congo, Côte D’Ivoire, Equatorial
Guinea, Gabon, Guinea-Bissau, Mali, Niger, Senegal, and Togo. Iran prefers euros for all
foreign transactions, including oil.15 Iran has the world's fourth-largest reserves of oil.16 It has
converted all dollar-denominated assets held in foreign countries to the euro.

The benefits of the euro are diverse and are felt on different scales, from individuals and
businesses to whole economies. They include:

 More choice and stable prices for consumers and citizens

 Greater security and more opportunities for businesses and markets
1
 Improved economic stability and growth
 More integrated financial markets
 A stronger presence for the EU in the global economy
 A tangible sign of a European identity

Many of these benefits are interconnected. For example, economic stability is good for a
Member State’s economy as it allows the government to plan for the future. But economic
stability also benefits businesses because it reduces uncertainty and encourages companies to
invest. This, in turn, benefits citizens who see more employment and better-quality jobs.

8
How do these benefits of the euro arise?

The single currency brings new strengths and opportunities arising from the integration and
scale of the euro-area economy, making the single market more efficient.

Before the euro, the need to exchange currencies meant extra costs, risks and a lack of
transparency in cross-border transactions. With the single currency, doing business in the euro
area is more cost-effective and less risky.

Meanwhile, being able to compare prices easily encourages cross-border trade and investment
of all types, from individual consumers searching for the lowest cost product, through
businesses purchasing the best value service, to large institutional investors who can invest
more efficiently throughout the euro area without the risks of fluctuating exchange rates.
Within the euro area, there is now one large integrated market using the same currency.

Benefits worldwide

The scale of the single currency and the euro area also brings new opportunities in the global
economy. A single currency makes the euro area an attractive region for third countries to do
business, thus promoting trade and investment. Prudent economic management makes the euro
an attractive reserve currency for third countries and gives the euro area a more powerful voice
in the global economy.

Scale and careful management also bring economic stability to the euro area, making it more
resilient to so-called external economic 'shocks', i.e. sudden economic changes that may arise
outside the euro area and disrupt national economies, such as worldwide oil price rises or
turbulence on global currency markets. The size and strength of the euro area make it better
able to absorb such external shocks without job losses and lower growth.

Realising the benefits

The euro does not bring economic stability and growth on its own. This is achieved first through
the sound management of the euro-area economy under the rules of the Treaty and the Stability
and Growth Pact (SGP), a central element of Economic and Monetary Union (EMU). Second,
9
as the key mechanism for enhancing the benefits of the single market, trade policy and political
co-operation, the euro is an integral part of the economic, social and political structures of
today’s European Union.

https://ec.europa.eu/info/business-economy-euro/euro-area/benefits-euro_en

9
 1
Pros and Cons of the Euro
9
On January 1, 1999, the European Union introduced its new currency, the euro. Originally, the
euro was an overarching currency used for exchange between countries within the union, while
people within each nation continued to use their own currencies. Within three years, however,
10
the euro was established as an everyday currency and replaced the domestic currencies of many
member states. Although the euro is still not universally adopted by all the EU members as the
main currency, most of the holdouts peg their currency in some way against it.

The euro provided several economic advantages to the citizen of the EU. Travel was made
easier by removing the need for exchanging money, and more importantly, the currency risks
were removed from European trade. Now a European citizen can easily identify the best price
for a product from any company in member nations without first running each price through a
currency converter. This makes prices across the EU transparent and increases the competition
between members. Labour and goods can flow more easily across borders to where they are
needed, making the whole union work more efficiently.

The biggest benefit of the euro is that it is managed by the European Central Bank. The ECB
has to balance the needs of all the member nations and therefore is more insulated from political
pressure to inflate or manipulate the currency to meet any one nation's needs.

Of course, the euro is not without controversy. Many smaller member nations believe the
9
system is tilted in the favour of large nations. While this may be true, the benefits of being an
1
EU member outweigh the negatives, and there is no shortage of nations seeking membership.

The problem before the euro, as illustrated specifically with the European Exchange Rate
Mechanism meltdown, was countries altering their own currencies to meet short-term
economic needs – while still expecting foreign nations to honour the increasing unrealistic
exchange rates. The euro has removed much, but not all, of the politics from the European
currency markets, making it easier for trade to grow.

https://www.investopedia.com/ask/answers/09/euro-introduction-debut.asp
9
The euro is the form of money for the 19 member countries of the eurozone. It's the second
most widely used currency in forex trading after the U.S. dollar.1 It's also the second most
widely held foreign exchange reserve used by central banks.2 As of the first quarter of 2019,
foreign governments held $2.2 trillion compared to $6.7 trillion in U.S. dollar reserves.3 The
International Monetary Fund (IMF) reports this quarterly in its COFER.

10
Like the dollar, the euro is managed by one central bank, the European Central Bank. But being
shared by 19 countries complicates its management.56 Each country sets its own fiscal policy
that affects the euro's value.

The euro was initially proposed to unify the entire European Union. All 28 member nations
pledged to adopt the euro when they joined the EU. But they must meet budget and other
criteria before they can switch to the euro. These were set out by the Maastricht Treaty.7 As a
result, nine EU members have not adopted the euro. As of 2018, they were Bulgaria, Croatia,
the Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and the United Kingdom.

The euro symbol is €. Euros are divided into euro cents each euro cent is one one-hundredth of
a euro. There are seven denominations: €5, €10, €20, €50, €100, and €500.8 Each bill and coin
is a different size. The bills also have raised print, while the coins have distinct edges.9 These
features allow the visually impaired to distinguish one denomination from another.

Advantages of Euro

Countries receive many benefits for adopting the euro.18 Smaller ones have the advantage of
being backed by Europe's powerhouse economies, Germany and France. The euro allows these
weaker countries to enjoy lower interest rates. That's because the euro wasn't as risky to
investors as a currency with less demand from users and traders. Over the years, these lower
interest rates have led to more foreign investment. That boosted the smaller nations' economies.

Some say the more developed countries reaped greater rewards from the euro. Their larger
companies could produce more at a lower cost, thus benefiting from economies of scale. They
exported their cheap goods to the less developed eurozone nations. Smaller companies couldn't
compete.

These larger companies also profited from investing cheaply in the less-developed economies.
That increased prices and wages in the smaller countries, but not the larger ones. The larger
businesses gained even more of a competitive advantage. In a sense, the euro allowed them to
export the inflation that typically comes with the expansionary phase of the business cycle.
They enjoyed the benefits of high demand and production without paying the higher price.

11
Disadvantages

With all these advantages, why haven't the remaining eight EU members adopted the euro?
Some countries are reluctant to give up some authority over their monetary and fiscal policies
when they join the eurozone. Adopting the euro means countries also lose the ability to print
their currency. That ability allows them to control inflation by raising interest rates or limiting
the money supply.

They must keep their annual budget deficits less than 3% of their gross domestic product.19
Their debt-to-GDP ratio must be less than 60%.20 Many simply haven't been able to cut
spending enough to meet this criterion.

Euro to Dollar Conversion

The euro to U.S. dollar conversion is how many dollars the euro can buy at any given time.
The current exchange rate measures it. Forex traders on the foreign exchange market determine
the exchange rate. They change on a moment-by-moment basis, depending on how traders
assess the risk versus the rewards for holding the currency.

Traders base their assessment on a number of factors. These include central bank interest rates,
sovereign debt levels, and the strength of the country's economy. The ECB website provides
the current exchange rate for the euro.21

When the euro launched in 2002, it was worth $0.87. Its value grew as more people used it
through the years. It reached its record high of $1.60 on April 22, 2008.22 Investors fled from
dollar-denominated investments during the near-bankruptcy of investment bank Bear Stearns.

As it became apparent the U.S.-based subprime mortgage crisis had spread globally, investors
fled back to the relative safety of the dollar. By June 2010, the euro was only worth $1.20. Its
value rose to $1.45 during the U.S. debt crisis in the summer of 2011.

By December 2016, it had fallen to $1.03 as traders worried over the consequences of Brexit.
It rebounded to $1.20 in September 2017 after traders grew frustrated with the lack of progress
on President Trump's economic policies. It now stands at $1.11 as of August 2019. Traders are
concerned about a global economic slowdown due to Trump's trade war.

12
Eurozone Crisis Impact

In 2009, Greece announced it might default on its debt.23 The EU reassured investors that it would
guarantee the debt of all eurozone members. At the same time, it wants indebted countries to install
austerity measures to ratchet down their spending. The Greek debt crisis threatened to spread to
Portugal, Italy, Ireland, and Spain. The European economy has rebounded since then. But some say the
eurozone crisis still threatens the future of the euro and the EU itself.

Euro History

The first phase of the euro launch occurred in 1999.24 It was introduced as the currency for electronic
payments. These included credit and debit cards, loans and for accounting purposes. During this initial
phase, old currencies were used for cash only. Eleven nations adopted it right away. They were Austria,
Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain.

The second phase was launched in 2002 when euro coins and banknotes appeared in physical form.
Each country has its own distinct form of the euro coin.

The Bottom Line

After the U.S. dollar, the euro is the second most traded currency in the world. It is the currency of 19
countries in the European Union.25 It is managed by the ECB. The euro was created to facilitate and
integrate the European economy.

As of 2019, twenty-five countries and five territories transact with the euro. Some of these use the euro
even if they are not part of the EU. But other European countries such as the United Kingdom and
Denmark, use their own currency. They have opted to set their own interest rates and monetary policies
and maintain independence of their own economies. But in a financial crisis, they must manage their
own without the assistance of the ECB.

https://www.thebalance.com/what-is-the-euro-3305928

13
Impact analysis
This paper contributes to the debate on the achievements of unconventional policy with the
novel quantitative results that are the subject of this section. Notoriously, efforts to measure
the effects of monetary instruments, particularly when they are combined in complex packages,
are bedevilled by identification issues. In the case at hand, such issues are magnified by those
interlocking cross-influences among the ECB’s four instruments that we try to describe in the
previous Section. One strategy for identifying and quantifying these influences could have
involved using a structural model to simulate worlds in which the central bank would have
contemplated or avoided NIRP, FG, APP or TLTROs. An evaluative method based on a
structural model has many advantages, including discipline and coherence with theory. But it
has two non-trivial drawbacks.

First, it requires making very strong propositions about the impact of policy pronouncements
on agents’ expectations regarding, not only the future path of policy, but also the future state
of the world (their own income and consumption possibilities) more in general. Second, in
order for us to be able to quantify precisely the contribution of the cross-externalities mentioned
11
in even only a few of the cells in Table 3 to a given observed change in credit conditions, we
would have to simulate a quite complex structural model comprising multiple sectors and
channels. To name only a few of them, the model would have to incorporate forms of money
illusion and/or heterogeneous investors – à la Hanson-Stein – to generate the Gesell-tax effects
that we mention But, in order to support any direct effect of central bank bond purchases on
term premia the Hanson-Stein market segmentation hypothesis would need to co-exist with
another type of investor

heterogeneity: the presence of risk-neutral arbitrageurs with limited balance sheet capacity
alongside buy and-hold investors with a preferred habitat. Liquidity provision – a collateral
implication of central bank asset purchases that is often ignored in structural modelling of QE
– would have to be explicitly allowed for to give the effects a chance. And again, the pervasive,
but nuanced signalling channels that we categorise in a variety would require hard-wiring
various behavioural assumptions about agents’ expectations formation process.

Therefore, in the interest of tractability, we had to make hard choices and cut through many
12
corners. First, we confined our analysis to only few dimensions: essentially, the “diagonals”
3
and which we consider the first-order effects of the four instruments, respectively – with very
selective inroads into “off-diagonals”. Among the latter, we believe our quantitative analysis

14
can reasonably evaluate also explains the simple intuition of why APP is a good complement
7
of NIRP in a very parsimonious two-period model but does not quantify the extent of the
complementarity.

Second, we adopt a general identification scheme which assigns sets of instruments to observed
adjustments in the yield curve that financial intermediaries use as the basis to price credit, and
3
in credit spreads, respectively. In line with the general taxonomy the NIRP, the PSPP (the
sovereign bond component of the APP) and FG are seen as influencing primarily the yield
curve, while TLTROs and the private bond components of the APP are important determinants
of the “intermediation wedge”, the difference between the final cost of loans for households
and firms, and the risk-free interest rate that banks and other intermediaries take as reference
for rate fixation in pricing those loans. Our main contribution is in trying to tease apart the
effects on financial conditions, growth and inflation of the NIRP, FG and the PSPP. Here,
again, the general identification assumption is that the NIRP and FG enhance the central bank’s
traction on the short- to medium maturity segment of the overnight forward curve, while the
PSPP operates principally on the long end of the sovereign curve.

Conclusion
11
The history of fiscal federations provides us with a number of conditions necessary for a fiscal
union to function smoothly and successfully and thus also the monetary union on which the
13
fiscal union is based. The first and probably the most important condition is a credible
commitment to a no-bailout rule for the members of the fiscal union. The second one is a degree
9
of revenue and expenditure independence of the members of the fiscal union reflecting their
political preferences. The third condition is a well-developed transfer mechanism to be used in
6
episodes of distress. This transfer mechanism can be facilitated by the establishment of a
common bond. The fourth condition is a capacity to learn from past mistakes and adapt to new
economic and political circumstances.
14
The Eurozone was created without an effective fiscal union. The institutions that were
1
established to serve as the foundation for the fiscal union (the Maastricht Treaty and the
Stability and Growth Pact) – to discipline domestic fiscal policies – did not function as planned
as revealed by the crises and recession from 2007-2009 and onwards. The lessons from the
historical experience of the five federal states surveyed by us could be helpful for the Eurozone
to avoid disintegration.

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Reference-
 https://www.thebalance.com/what-is-the-greece-debt-crisis-3305525
 https://www.weforum.org/agenda/2019/01/the-euro-turns-20/
 https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2346~dd78042370.en.pdf
 https://voxeu.org/article/fiscal-union-euro-some-lessons-history
 Benchmark of different charges for prediction of the partitioning coe, by Fizer, Oksana; Fize –
2018
 A STUDY ON SELECTED ECONOMIC FACTORS INFLUENCE ON NIFTY -Submited to
JNTUH,TELANGANA By '15141E0041' Student Paper
 Contribution of cardiac and extra-cardiac disease burden to risk of c, by Wolsk, Emil Clagge-
2017
 Dreams can come true The first steps towards a peripheral blood scre, by Haferlach, C; Hafer -
2018 Publication
 Published by International Journal of Computer Science and Information Tech.-
www.ijcsit.com Publication

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