European Integration: Some stylised facts

throughout the entire period, and looking at this macroeconomic variable alone,
integration has proceeded very successfully.

The nominal convergence, measured by the convergence of interest rates, is
even more explicit. Differences in long-term nominal interest rates essentially
reflect differences between the expected inflation rates of the member countries.
Confidence in the feasibility of the EMU project significantly influenced the
differences in interest rates throughout the 1990s. After the breakdown of the
fixed exchange rate co-operation of the EMS following the two currency crises
in 1992 and 1993, there were widespread scepticism concerning the realisation
of the EMU project, and as a consequence, there were huge differences in the
exchange rate levels. This scepticism gradually disappeared concurrently with
the political determination to realise the project from January 1, 1999 and
compared with previous years, the differences in exchange rates were therefore
reduced to a moderate level.

2.2 Business cycle synchronisation

Whereas the monetary integration within the EU is obvious, the
macroeconomic results of the process of integration concerning total output and
employment are less clear. The economic development thus often differs
between the individual member countries, especially in the short run. There is
therefore a lack of synchronisation of the business cycles between Member
States. This fact has not changed markedly since the early 1980s as is shown in
Figure 5 presenting annual real growth rates

In GDP since 1980.

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