Note:   Terms are defined here in the context of this inquiry, not necessarily as they are more generally understood. Terms defined elsewhere in the Glossary are shown in italics.

3 per cent threshold	Limit for budget deficit (see excessive deficit)
Asymmetric shock	Economic shock which affects some Member States, regions or industries more severely than others, and which might therefore suggest the need for a different response in different parts of the euro-zone
Automatic stabilisers	The downturn in government revenue and increase in government expenditure which automatically arise in a recession, cushioning the reduction in aggregate demand.
Bail out	See no-bail-out clause
Balanced budget	Situation where a government's revenue is equal to its spending, so it has no need to borrow or lend.
Balassa-Samuelson effect	Effect making it possible for a country to have a high overall level of inflation without losing international competitiveness (because the inflation is mainly in the prices of goods which are not traded)
Banque de France	The central bank of France
Basis points	The unit of measurement of the ECB refinancing rate: 0.01 per cent
BEPGs	Broad Economic Policy Guidelines
BIS	Bank for International Settlements
Broad Economic Policy
Guidelines	Guidelines established under Article 99(2) EC, in the context of which Member States are required to conduct their economic policies
Budget deficit threshold	3 per cent of GDP (see excessive deficit)
Bundesbank	The central bank of Germany
Cardiff process	Process agreed at the June 1998 Cardiff European Council for assessing and reporting on product and capital markets
Change-over	The transition from the use of national currencies to the use of the euro (to take place on 1 January 2002)
Convergence Programme	National programme produced (instead of a Stability Programme) by Member States outside the euro-zone, showing their progress towards convergence
Core inflation	A measure of inflation which strips erratic or temporary movements out of the actual inflation rate, so as to give a better guide to the future course of inflation
Cyclically adjusted deficit	Structural deficit
Cyclically adjusted net
lending	The converse of cyclically adjusted deficit
Cyclical safety margin	The largest fiscal deficit that a country is likely to need to run during a recession, were its budget to be balanced on average over the cycle
Debt ratio	The ratio of Government debt to GDP
ECB	European Central Bank
ECOFIN	The Council of the European Union meeting on economic and financial affairs
EMS	European Monetary System
EMU	Economic and Monetary Union
ERM	Exchange Rate Mechanism: set up in 1979 to limit exchange rate movements in the EMS, with the intention of promoting convergence to common low inflation rates and unchanging parity exchange rates, while accommodating countries with initially different inflation rates. Superseded by the establishment of the euro in stage 3 of EMU on 1 January 1999 for participating Member States
ESCB	European System of Central Banks, consisting of the ECB and the national central banks of all EU Member States
EU-11	The 11 original participating Member States
Euribor	Euro inter-bank offered rate: the interest rate on euro floating rate instruments
Euro area	Euro-zone
Eurobond	Bond denominated in a currency other than that of the country in which it is issued, usually underwritten by a financial syndicate (not to be confused with euro-denominated bonds)
Euro-denominated bonds	Bonds denominated in euros (also known as euro-zone bonds or euro-area bonds)
Euro floating rate
instruments	Short term deposits (for 1, 3, 6 or 12 months)
Euro-group	The group of finance ministers of initially eleven (now twelve) Member States within the euro-zone, which meets every time there is a meeting of ECOFIN
Euroland	Euro-zone
Eurosystem	European System of Central Banks
Euro-X (later Euro-11, now Euro-12)	The euro-group
Euro-zone	Term used to refer collectively to those Member States which are participating in the single currency
Exceptional circumstances	Circumstances held to justify a deficit exceeding 3 per cent of GDP (see excessive deficit)
Excessive deficit	Defined in Article 104 EC and Protocol 20 to the EC Treaty (Protocol on the Excessive Deficit Procedure), introduced by the Maastricht Treaty, as a deficit exceeding 3 per cent of GDP, in the absence of exceptional circumstances
Executive Board of ECB	Consists of six members, including the President of the ECB and the governor of one euro-zone central bank; appointed by governments of Member States after consultation with European Parliament
Fed	The United States Federal Reserve Board
Fiscal balance	Situation where government expenditure equals government revenue, with no government net lending or borrowing.
Fiscal consolidation	Movement towards a smaller fiscal deficit or bigger fiscal surplus that is likely to be sustained over the medium term
Fiscal deficit	Ratio of the government's deficit to GDP
Fiscal stabilisation	Use of changes in the levels of government expenditure and revenue (whether automatic or discretionary) to dampen swings in the rate of economic activity over the course of the business cycle
Fiscal surplus	Ratio of the government's surplus to GDP
GDP	Gross Domestic Product
General Council of ECB	Advisory body, including representatives of all EU Member States (not merely the participating Member States)
General government	Central, regional and local government taken together
Governing Council of ECB	The supreme decision-making body of the ECB, comprising the governors of the central banks of the participating Member States with the members of the ECB's Executive Board
Government deficit	Fiscal deficit
HICP	Harmonised Index of Consumer Prices (EU-wide)
M3	Broad monetary aggregate, the reference value for whose growth in the euro-zone has been set by the ECB at 4½ per cent
M&A	Mergers and acquisitions
NESC	National Economic and Social Council (Ireland: comprised of representatives of all the social partners)
Netting	Calculation so as to enable payments to be based on net trades
NICs	Newly industrialised countries
No-bail-out clause	Agreement precluding collective liability for debt incurred by individual Member States
One-size-fits-all	Reference to the fact that in the euro-zone a single monetary policy/ interest rate applies to all participating Member States
Pact	Stability and Growth Pact
Participating Member State	A Member State of the EU which is participating in the single currency
PMI	Purchasing Managers' Index (based on purchasing managers' assessment of business conditions)
PPF	Programme for Prosperity and Fairness (Ireland)
Price stability	Defined by the ECB as an annual increase of below 2 per cent in the HICP for the euro-zone as a whole
PSBR	Public Sector Borrowing Requirement
Refinancing rate	The interest rate set by the ECB
RPI	Retail Prices Index (UK)
RPIX	Retail Prices Index excluding mortgage interest payments (UK)
SGP	Stability and Growth Pact
SMEs	Small and medium-sized enterprises
Social partners	Representatives of industry and of organised labour
Stability and Growth Pact	Agreement on the surveillance and co-ordination of budgetary positions and on speeding up and clarifying the implementation of excessive deficit procedures, whose provisions are set out in Council Regulations 1466/97 [1997] OJ L209/1 and 1467/97 [1997] OJ L209/6, and in a European Council Resolution of 17 June 1997 on the Stability and Growth Pact. It requires participating Member States to submit an annual Stability Programme
Stability Programme	National programme prepared by participating Member States setting out plans for bringing cyclically adjusted deficits towards a target level (required by the Stability and Growth Pact)
Stage 3 (of EMU)	The present stage of EMU, beginning with the launch of the single currency on 1 January 1999
Stagflation	A combination of rising inflation, low growth and rising unemployment
Structural deficit	A government's deficit corrected for short-term and cyclical factors, intended to give a better forecast of the future path of the deficit (also known as "cyclically adjusted deficit" or "medium-term deficit")
Surveillance	See Stability and Growth Pact
TARGET	Trans-European Real-Time Payment System for cross-border payments