Leadership and Decision Making in the Eurozone: A Critical Analysis of Recent Events - Essay Example

These countries even agreed on a ‘single currency’ which was the Euro. The members or rather the countries which were entailed in the EU are collectively stated as the ‘Eurozone’ (Ahearn & et. al., 2012). The Euro was accepted as the widespread currency which was used by all the countries who were a member since the year 2002 of the EU. The introduction of the Euro was settled on before ten years in Maastricht. This was decided for the reason of making EU a strong player in the arena of the international economy.

A common currency that is the Euro was also agreed upon to bring down the degree of ambiguity and misrepresentations which were found to be arising with regard to the majority of the different currencies which were then widely used in the regular market. For the reason of making certain of the operations related to the EMU, the EU members settled on an exceptional international institution which was referred to as the “Stability and Growth Pact” (SGP). This particular institution was established with the intention of providing guarantee regarding homogeneity of the existing members to the maximum degree possible prior to the currency introduction.

The SGP was also made to ensure internal steadiness regarding the Euro-zone later (Eichengreen & Wyplosz, 1998). The Process of Decision Making Evolution of the Pact The Stability and Growth Pact was referred to as a ‘political agreement’ which was made for the reason of developing restrictions with regard to the public debt and the fiscal deficits related to the European Monetary Union (EMU) Member States. These policies were developed in order to ensure a strong administration of the public finances among the countries entailed in EMU.

The guidelines were aimed at checking an individual Member State’s negligent budgetary guidelines from leaking out and damaging the economic steadiness of the complete Euro area. The laid down rules as well as regulations mentioned in the Pact were targeted with the purpose of attaining constant, long-run union in relation to the economies of the countries falling under the area of Euro (Larosiere, 2004). The quantified boundaries related to the Stability and Growth Pact was drawn from the ones that were developed by the ‘Maastricht Treaty (1992)’.

It was stated there that the fiscal deficits of a particular member state should not go beyond 3 percent of the entire GDP and the public debt to remain within 60 percent of the entire GDP. These boundaries or restrictions were planned to keep a check on and control an extreme budgetary deficit (Larosiere, 2004). The history related to the currency regimes goes a long way in relation to the European Communities (EC) which was formed in the year 1958. In the early period of the year 1969, the Heads of Governments and States came to a conclusion of making the monetary as well as the economic union to be a formal objective with regard to the European integration.

In the year 1970, the other plan was pursued which was known as the Werner Plan. This