Within three years since its introduction in 1999, the euro has developed into the second most important global reserve currency. This thesis is aimed at explaining mechanisms that contributed to...Show moreWithin three years since its introduction in 1999, the euro has developed into the second most important global reserve currency. This thesis is aimed at explaining mechanisms that contributed to the euro’s international position. The international role of the euro before and after the eurozone debt crisis will be compared, in order to explain why the euro maintained its position subsequent to this crisis. In addition, this thesis will highlight the importance of the Economic and Monetary Union due to its relation to the development of the international role of the euro. A stronger international role can be achieved by strengthening the Economic and Monetary Union, and in turn a more enhanced monetary union acts as a shield against possible financial crises. By using the new institutionalist theory of historical institutionalism along with the method of process-tracing, it is anticipated to determine critical events and to develop a process of causal mechanisms that can explain why the euro happened to maintain its international position after enduring one of the most critical economic and financial setbacks in the history of the eurozone.Show less
The Economic and Monetary Union of Europe is currently under pressure. As the dust of the financial crisis is currently setting, Greece saw a hard-left swing of the government in the beginning of...Show moreThe Economic and Monetary Union of Europe is currently under pressure. As the dust of the financial crisis is currently setting, Greece saw a hard-left swing of the government in the beginning of 2015, winning on the back of an anti-austerity campaign. Greece is currently trying to find a consensus on the payback of lending’s with the troika, representing a group bailout creditors consisting of the ECB, the European Commission and the IMF, but it is not the only euro country facing economic difficulties. Since the launch of the single European currency, mutual fiscal performances have been mixed. In order to impose fiscal discipline on the Eurozone candidates, the Stability and Growth Pact (SGP) was implemented in 1997, reflecting a full set of fiscal rules and several monitoring- and correction mechanisms on a supranational level. However, after two rounds of reforms in 2003-2005 and 2010-2011, scepticism prevails. The latest reforms continue to reflect an unwillingness of member states to transfer the necessary degree of sovereignty over macro-fiscal objectives to the European level mirroring the need of further political integration. While these observations helps put the current tensions into perspective, they cannot explain why member states have been showing mixed results while being subjected to the same external constraints. This research will try to seek answers to this question. Where problems occur on a supranational level due to the lack of political integration, there is a need for increased monitoring on a national level. The Economic and Monetary Union of Europe is in essence a two-way relationship. In the end, the increased fiscal imbalances in the euro area as a whole and the current critical situation in some of the member states, risk undermining stability, growth and employment, as well as the sustainability of the EMU itself.Show less
