Recession era History of the euro

the lisbon treaty formalised jean-claude juncker s post president of eurogroup

as result of global financial crisis began in 2007/2008, eurozone entered first official recession in third quarter of 2008, official figures confirmed in january 2009. eu in negative growth second, third , fourth quarters of 2008 , first quarter of 2009 before returning positive growth (for eurozone whole). despite recession, estonia acceded eurozone , iceland put in eu application join euro, seeing @ time safe haven.

reform

in 2009, lisbon treaty formalised eurogroup, meeting of euro finance ministers, official president. jean-claude juncker served president before , after formalisation , has been advocate of strengthening group, economic co-operation , common representation. appetite stronger economic co-operation grew due recession , potential failure of weaker eurozone members. germany had opposed previous moves strengthen eurogroup, such french president nicolas sarkozy s attempts @ eurogroup summits, due fears of undermining ecb s independence. jean-claude trichet, succeeded duisenberg ecb president in 2003, fended off numerous attacks sarkozy @ start of recession. before formalisation of eurogroup, eurozone leaders held extraordinary summit in reaction financial crisis on 11 october 2008 in paris. rather eurogroup meeting finance ministers, met head of states or government (similar european council) define joint action plan eurozone , european central bank stabilise european economy. these such meetings many euro governance reforms agreed.

the leaders hammered out plan confront financial crisis involve hundreds of billions of euros of new initiatives head off feared meltdown. agreed bank rescue plan: governments buy banks boost finances , guarantee interbank lending. coordination against crisis considered vital prevent actions of 1 country harming , exacerbating bank solvency , credit shortage problems.

despite initial fears speculators in 2009 stress of such large recession lead break-up of eurozone, euro s position strengthened year progressed. far poorer performing economies moving further away , becoming default risk, bond yield spreads between germany , weakest economies decreased easing strain on these economies. of credit turn around in fortunes has been attributed ecb, injected €500bn banks in june. indeed, euro came seen safe haven, countries outside such iceland fared worse euro. iceland subsequently applied eu benefit of using larger currency support of ecb.

however, risk of default in greece , other members in late 2009–10, eurozone leaders agreed agree provisions bailing out member states not raise funds (triggered greece in april 2010). u-turn on eu treaties rule out bail out of euro member encourage them manage finances better. yet greece struggling restore finances, other member states @ risk , repercussions have on rest of eurozone economy; temporary bail out mechanism agreed , devised in form of special purpose vehicle (spv) named european financial stability facility (complemented european financial stabilisation mechanism , funds form international monetary fund), aiming @ preserving financial stability in europe providing financial assistance eurozone states in difficulty. crisis spurred consensus further economic integration , range of proposals such european monetary fund or federal treasury.

however, in june 2010, broad agreement reached on controversial proposal member states peer review each other s budgets prior presentation national parliaments. although showing entire budget each other opposed germany, sweden , uk, each government present peers , commission estimates growth, inflation, revenue , expenditure levels 6 months before go national parliaments. if country run deficit, have justify rest of eu while countries debt more 60% of gdp face greater scrutiny. plans apply eu members, not eurozone, , have approved eu leaders along proposals states face sanctions before reach 3% limit in stability , growth pact. poland has criticised idea of withholding regional funding break deficit limits, impact poorer states. in june 2010 france agreed germany s plan suspending voting rights of members breach rules.

in late 2010/early 2011 agreed replace european financial stability facility , european financial stability mechanism larger , permanent european stability mechanism (esm). esm required treaty amendment allow , separate treaty establish but, if ratified successfully, established in time take on when old facilities expire in 2013. meanwhile, support italy , prevent having ask bail-out later, ecb controversially started buying italian bonds, had done greece.

in march 2011 initiated new reform of stability , growth pact aiming @ straightening rules adopting automatic procedure imposing of penalties in case of breaches of either deficit or debt rules. euro plus pact sets out wide range of reforms take place in eurozone ensure , french , german governments further agreed push true economic government involve twice-yearly eurozone leader summits , financial transactions tax.

the european fiscal union proposal treaty fiscal integration described in decision adopted on 9 december 2011 european council. participants eurozone member states , other eu members without united kingdom , czech republic. treaty entered force on 1 january 2013 16 states completed ratification prior of date , on 1 april 2014 entered force 25 signatories.

baltic states

despite speculation crisis in greece spread , euro might fail, newer eu states have joined currency. in 2010 estonia gained support of european commission, central bank , parliament accession on 1 january 2011 estonia adopting currency on date. in 2013 latvia gained support of european commission, central bank , parliament accession on 1 january 2014 latvia adopting currency on date. on 23 july 2014 lithuania became last baltic state gain permission join euro, adopted on 1 january 2015.