Economics, 3rd Edition

Questions

1 

What do you think is meant by the 

statement: ‘The Maastricht Treaty 

created a restrictive European 

monetary union by keeping fiscal 

policy national, subject only to a 

stability pact’?

2 

Why do you think that the lack 

of a ‘mechanism to ease shocks 

to individual member states’ is 

described as the ‘Achilles’ heel 

of the euro?

3 

Explain how a ‘federal euro 

budget’ would help to reduce the 

impact of short-term shocks to 

member economies?

4 

Why is the argument for a euro-

budget based on a comparison 

with the United States likely to 

be weak, according to the author 

of this article?

5 

Why might a voluntary risk- 

pooling scheme among inter-

ested member states be more 

likely to succeed, according to 

the author, than an enforced EU- 

wide scheme?

There are stark contrasts in economic welfare across Europe. In parts of Italy there are regions suffering very weak 

economic growth, whereas in parts of Germany the population benefits from the strong German economy, as exemplified 

by the snow-covered mansions in Heidelberg.

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