Pbl - the European Union Ten Years After the Euro Zone Crisis-Manuel Sanchez

1.- Clear Understanding Of The Main Concepts

Accruing: To come to one as a gain // union in the EU shows additional economic benefits accruing to its members as a result of the elimination of transaction costs related to currency exchange in the area, the efforts by member countries to comply with the convergence criteria, and the price stability attained.

Sovereign Bonds: A debt security issued by a national government within a given country and denominated in a foreign currency. The foreign currency used will most likely be a hard currency, and may represent significantly more risk to the bondholder. The government of a country with an unstable economy will tend to denominate its bonds in the currency of a country with a stable economy. Because of default risk, sovereign bonds tend to be offered at a discount. Brady bonds, which are issued by governments in developing countries, are a popular example of sovereign debt securities.

Maastricht Treaty: The Treaty on European Union (TEU), signed in Maastricht on 7 February 1992, entered into force on 1 November 1993. This Treaty is the result of external and internal events. At external level, the collapse of communism in Eastern Europe and the outlook of German reunification led to a commitment to reinforce the Community's international position. At internal level, the Member States wished to supplement the progress achieved by the Single European Act with other reforms.

Treaty of Maastricht responds to five key goals:

1. Strengthen the democratic legitimacy of the institutions

2. Improve the effectiveness of the institutions

3. Establish economic and monetary union

4. Develop the Community social dimension

5. Establish a common foreign and security policy

Macro-Prudential Tools : Indicators that provide data on the health of these institutions as a whole including capital adequacy, asset quality, management performance, profitability, liquidity and sensitivity to systematic risks. Macroeconomic data used includes gross domestic product (GDP) growth rates, inflation, interest rates, balance of payments, exchange rates, asset prices and the correlation of markets within the system. Scenario analysis and stress tests are major component of this analysis. Finally, macro-prudential analysis looks at key components of the financial markets, including prevailing credit ratings and the yields and market prices of financial instruments.

1997 Stability And Growth Pact: Also known as the Treaty of Amsterdam, establishes the political basis for the stability and growth pact. It provides the Member States, the Council and the Commission with firm policy guidelines for implementation of the stability and growth pact.