Economics of the EU is an optional year-2 module available on all programmes and is designed to deepen the students’ knowledge of: (a) The history, institutional structures and the major economic policies characterising the process of the European economic and monetary integration (b) The theoretical debate on the potential costs and benefits of the European Economic and Monetary Union (EMU); (c) Issues of economic policy relating to the EMU; (d) The causes and consequences of the European sovereign debt crisis, the policy challenges arising at the national and union level and the crisis’ potential resolutions 

A    Knowledge and Understanding:

• outline the historical process of economic and monetary integration in Europe.
• have a clear understanding of the potential economic costs and benefits originating from a country’s participation in the EMU.
• have a clear understanding of the potential credibility problems inherent in incomplete monetary unions such as the European Exchange Rate Mechanism.
• have a clear understanding of the objectives and limitations of the criteria set by the Maastricht Treaty for a country’s accession to the EMU.
• have a clear understanding of the institutional framework within which the European Central Bank (ECB) contacts a single monetary policy on behalf of the member-states of the EMU; the rationale underlying this framework; and its potential drawbacks.
• have a clear understanding of the policy objectives of the single monetary policy; the policy instruments through which this policy is contacted; and the debate concerning the policy’s effectiveness and limitations.
• have a clear understanding of the theoretical arguments for and against the fiscal-policy provisions of the Stability and Growth Pact; and the debate concerning the latter’s potential revision.
• have a clear understanding of the implications of the EMU in global financial markets.
• have a clear understanding of the causes of the European sovereign debt crisis, the challenges it poses and its potential resolutions.

B    Intellectual Skills: 

• reasoning;
• analysis of practical issues using theoretical frameworks;
• critique.

C    Transferable Skills: 

• Reading and précis;
• Debating;
• Critical understanding of media output.

There are approximately 36 hours of lectures and eight hours of classes for each student spread over the academic year.  Classes consist of groups of eight to ten students and most of the classes are organised in a debating format with students being expected to prepare by reading on the class topic.  At the class they are broken into subgroups and given about 15 minutes to prepare a brief debating type of presentation for or against the class topic. Each type of class is intended to prepare the students for different types of question in the eventual examination.

Being a second year course students are expected to read extensively from the wide variety of sources, textbooks, advanced collections of readings (e.g. on EMU) and websites which are now available on all aspects of the EU.

Indicative study hours:   200

a)    An essay of some 2500-3000 words which require students to do significant literature or data search of their own, thereby beginning to develop their ability and confidence in carrying out research on their own initiative (30%)

b)    A major end of year examination, including compulsory and optional questions, which will test students’ grasp and understanding of the material taught throughout the academic year (70%)

The Theory of Optimum Currency Areas

• An analytical presentation of the potential economic costs from a country’s participation to the EMU.

A critique of the Theory of Optimum Currency Areas

• An analytical presentation of the theoretical objections to the predictions of the Theory of Optimum Currency Areas.

The potential economic benefits of the single currency

• An analytical presentation of the potential economic benefits from a country’s participation to the EMU

Potential costs and benefits compared

• An analytical presentation of the cost-benefit analysis relating to a country’s participation to the EMU.

The fragility of incomplete monetary unions

• An analytical presentation of the credibility problems inherent in incomplete monetary unions, such as the European Exchange Rate Mechanism; and the latter’s vulnerability to speculative attacks.

The transition to the EMU

• An analytical presentation of the Maastricht blueprint to the single currency: the rationale underlying the EMU-accession criteria and their potential drawbacks.

The European Central Bank: Objectives and institutions

• An analytical presentation of the institutional framework of the ECB; its rationale; the potential conflicts of interest it may cause; and the question of accountability.

Monetary policy in the Euro-area

• An analytical presentation of the main policy objectives of the singe monetary policy; the currently implemented monetary strategy; and the latter’s drawbacks: potential incompatibility with the domestic requirements of individual national economies and intra-EMU conflicts of interest.

Fiscal policy in the Euro-area

• An analytical presentation and evaluation of the fiscal-policy implications of the Stability and Growth Pact: rationale, potential benefits and costs.

The Euro and international financial markets

• A critical discussion of the potential implications of the euro for international financial markets.

The European sovereign debt crisis

• An analytical presentation and evaluation of the causes of the European sovereign debt crisis, the challenges it poses at the national and union level and its potential resolutions

De Grauwe, P. (2009), Economics of Monetary Union (8^th edition), Oxford University Press.

Arghyrou M.G. and Kontonikas A. (2011), The European debt crisis: Fundamentals, expectations and contagion, The European Commission, DG ECFIN, The European Economy – Economic Papers Series No 436.