Stagnation turned into recession in 1993, when GDP declined by 0.3%, only the second such downturn in the EU's history. Employment fell by a record 2.4 million during the year, as the unemployment rate jumped 1.1% to 10.6 percent of the civilian labor force. Government deficits reached an average of 6 percent of GDP (including a high of 15.5% in Greece), while across the EU gross public debt hit a record 66 percent of GDP. These developments led European leaders to adopt a number of growth-oriented programs, including the Edinburgh Growth Initiative of December 1992 and the Delors "White Paper on Growth, Competitiveness and Employment" of December 1993 (Miller, 1996).
The decline in Europe's economic fortunes reversed somewhat in 1994 due to a strong pick-up in the world economy, a marked easing of monetary conditions within the Union, and higher productivity, competitiveness and profitability resulting from business firms adjustment efforts. Yet prospects for a period of accelerating growth were tempered due to currency upheavals within the Union. A period of slower growth followed in 1995, at only 2.4 percent (Miller, 1996).
The International Monetary Fund has generally painted a bleak picture of Europe, as a region plagued by sky-high unemployment and boxed in by its drive to launch a single currency in 1998 (Miller, 1996). In the short-run the IMF sees some better times ahead for Europe, estimating that growth will average 2.5% in 1997 up from approximately 1.6 percent in 1996. However, the IMF also believes that its economic projections could prove too optimistic, especially if Europe's drive to cut budget deficits under the Maastricht Treaty acts as more of a drag on growth than expected (Miller, 1996).
The Maastricht treaty (the foundation document for the European Union) sets out tough budget guidelines that EU countries must meet in 1997 for entry into European Monetary Union in 1999. The IMF worries that the r...
The Economic Union. (2000, January 01). In LotsofEssays.com. Retrieved 01:19, November 01, 2014, from http://www.collegetermpapers.com/viewpaper/1303384031.html