BE 12 European Union Policies
EUROPEAN UNION POLICIES
TASK 4.3
1
European Policies
a. Monetary system (EMS)
European Monetary system was set up in 1979.
Its purpose is “ to establish greater monetary stability in the European Union. The exchange rates between currencies can fluctuate considerably.” ( BBP Professional education,
2004)
In Europe, EMS is playing a very important role
to recognize change in relative prices, avoid inflation risk premium, reduce the distortionary impact of tax and social security systems and maintain social cohesion and stability.
a. Monetary system (EMS)
European
Monetary System (EMS) was an arrangement established in 1979 under the Jenkins European Commission where most nations of the European Economic Community (EEC) linked their currencies to prevent large fluctuations relative to one another. After the collapse of the Bretton Woods system in 1971, most of the EEC countries agreed in 1972 to maintain stable exchange rates by preventing exchange fluctuations of more than 2.25%
(the European "currency snake"). In March 1979, this system was replaced by the European Monetary System, and the European
Currency Unit (ECU) was defined.
The basic elements of the arrangement were:
The ECU: A basket of currencies, preventing movements above
2.25% (6% for Italy) around parity in bilateral exchange rates with other member countries.
An Exchange Rate Mechanism (ERM)
An extension of European credit facilities.
The European Monetary Cooperation Fund: created in October
1972 and allocates ECUs to members' central banks in exchange for gold and US dollar deposits.
b. Common Agricultural Policy
(CAP)
The Common Agricultural Policy (CAP) is a system of European Union
agricultural subsidies and programmes. It represents 48% of the EU's budget, €49.8 billion in 2006 (up from €48.5 billion in 2005).
The CAP combines a direct subsidy payment for crops and land which may
be cultivated with price support mechanisms, including guaranteed minimum prices,
TASK 4.3
1
European Policies
a. Monetary system (EMS)
European Monetary system was set up in 1979.
Its purpose is “ to establish greater monetary stability in the European Union. The exchange rates between currencies can fluctuate considerably.” ( BBP Professional education,
2004)
In Europe, EMS is playing a very important role
to recognize change in relative prices, avoid inflation risk premium, reduce the distortionary impact of tax and social security systems and maintain social cohesion and stability.
a. Monetary system (EMS)
European
Monetary System (EMS) was an arrangement established in 1979 under the Jenkins European Commission where most nations of the European Economic Community (EEC) linked their currencies to prevent large fluctuations relative to one another. After the collapse of the Bretton Woods system in 1971, most of the EEC countries agreed in 1972 to maintain stable exchange rates by preventing exchange fluctuations of more than 2.25%
(the European "currency snake"). In March 1979, this system was replaced by the European Monetary System, and the European
Currency Unit (ECU) was defined.
The basic elements of the arrangement were:
The ECU: A basket of currencies, preventing movements above
2.25% (6% for Italy) around parity in bilateral exchange rates with other member countries.
An Exchange Rate Mechanism (ERM)
An extension of European credit facilities.
The European Monetary Cooperation Fund: created in October
1972 and allocates ECUs to members' central banks in exchange for gold and US dollar deposits.
b. Common Agricultural Policy
(CAP)
The Common Agricultural Policy (CAP) is a system of European Union
agricultural subsidies and programmes. It represents 48% of the EU's budget, €49.8 billion in 2006 (up from €48.5 billion in 2005).
The CAP combines a direct subsidy payment for crops and land which may
be cultivated with price support mechanisms, including guaranteed minimum prices,