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Europe


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Eurozone
The group of countries that have adopted the Euro as their currency and therefore have ceded control of monetary policy to the European Central Bank
Common Agricultural Policy
The agreement within the EU that guarantees prices for farmers etc. using minimum price guarantees etc. It has proved controversial as it has led to "wine lakes" and "butter mountains" i.e. large amou
The European Union
The group of countries that have signed up to treaties on free trade, free movement of labour and capital, shared competition laws etc. NB not the same as Eurozone!
European Commission
The bureaucracy which supports the European Union.
The European Central Bank
The body which oversees Eurozone monetary policy i.e. setting Eurozone base rates.
Transaction costs
Costs associated with currency exchanges which are eliminated if all countries have the same currency.
Price transparency
The ease with which it is possible to compare prices across a number of countries with the same currency.
Transition costs
The costs associated with adopting a new currency e.g. menu costs, slot machines, publicity etc.
Loss of sovereignty
The loss of power to control policy e.g. how Eurozone members can no longer control their own monetary policy
Asymmetric target
The ECB's target for inflation is less than 2% rather than 2% + or - 1 as the Bank of England's is. Some critics believe this make deflation more likely.
Fiscal stability pact
This is the agreement amongst Eurozone members to keep national debt and annual fiscal deficits within set limits. These limits were broken even before the global financial crisis.
Convergence criteria
These are the requirements a country must meet before being allowed to adopt the Euro. They include compliance with the fiscal stability pace, inflation with 1.5% of the three lowest EU countries, int
Exchange Rate Mechanism
The precursor to the Euro, a fixed exchange rate system in which all countries had to manage their exchange rates to only fluctuate in a narrow band around the German currency the Deutschmark.
Devaluation
The ability to deliberately 'weaken' a currency. This can improve exports but is not possible within a monetary union.