The European Monetary Union at (more than) 20! – Visitors from the Avans Hogeschool in Fulda

18/11/2022

Professors Maurer and Hillebrand prepare Dutch student group for their visit to the European Central Bank in Frankfurt am Main

On their way to the European Central Bank, the 60-strong group of students from the Avans Hogeschool in 's-Hertogenbosch, the Netherlands, and their four accompanying professors stopped off in Fulda on 10 November 2022. In addition to the presentation of Fulda University by the International Office and the Department of Business by Laura Yilmaz, the lecture "The European Monetary Union at (more than) 20 years" was the focus of the visit. Kai-Oliver Maurer and Rainer Hillebrand spoke about the empirical and theoretical situation of the European Economic and Monetary Union.

Kai-Oliver Maurer first traced the path to the euro from the Maastricht Treaty to the introduction of the common currency. The focus was on the so-called convergence criteria: a stable price level, a low long-term interest rate level, exchange rate stability and sound public finances. Mr Maurer then presented data on these criteria showing the extent of convergence. Roughly speaking, the history of monetary integration in Europe can be divided into two phases. The period from 1999 to 2009 can be considered a success story, as convergence increased and public finances were relatively sound, although not always within the framework of the Stability and Growth Pact. In contrast, the second phase, from 2009 to 2019, is more critical. As a result of the global financial and economic crisis, public debt increased dramatically in some member states, and long-term interest rates as an indicator of the sustainability of convergence also diverged more strongly again – to sum up: the overall picture is mixed.

Rainer Hillebrand then discussed the theoretical foundations of monetary integration. The so-called theory of optimum currency area is about the question of whether different countries should establish a monetary union if they have to give up their national monetary policy and their own exchange rate as policy instruments. The theory focuses on considerations of how the costs of this policy renunciation can be reduced – for example, through similar production structures, cross-border labour mobility, fiscal transfers such as a common unemployment insurance or homogeneous economic policy preferences. The question of whether or not the European Monetary Union meets the theoretical criteria can be answered with "partly yes, partly no". However, it should be noted that the euro has been first and foremost a political integration project in which economic considerations were not the main focus. It is therefore all the more important for the lasting success of the monetary union that the economic foundations are created and the institutions of the monetary union are further developed.

The presentations were followed by a lively discussion with interesting questions.