EMU is an abbreviation of Economic and Monetary Union. This term covers cooperation in the EU which concerns both economic and monetary matters, i.e. cooperation on economic policy, on a common currency (the euro) and on the setting up of the European Central Bank.
EMU consists of three stages.
| Denmark and the United Kingdom have a Treaty derogation which means they are not obliged to introduce the euro. Sweden has not introduced the euro because the country does not meet all the requirements which must be met for participation in the third stage of EMU. Among other things, Sweden is not considered to meet the requirement of a stable exchange rate. The reason for this is that in 1997 the Swedish Parliament decided that Sweden should not participate in the euro from the beginning, and Sweden has therefore not attempted to meet the requirement of a stable exchange rate, which requires joining ERM II. In all three counties eventual participation in the euro would have to be approved by a referendum. Denmark and Sweden held referendums on participation in the euro in 2000 and 2003 respectively. |
EMU has its origins in the 1988 Hanover European Council, when a committee was set up to prepare a report on how economic and monetary union with a common currency could be introduced.
The committee consisted of Jacques Delors, who at the time was the President of the European Commission, the then 12 national and central bank governors and three independent experts. The committee’s work culminated in the Delors Report of 1989.
The Delors Report proposed an economic and monetary union in three stages. In addition, the report proposed a better coordination of economic policy, rules on the size and financing of national budget deficits and the creation of an independent institution to be responsible for the EU’s monetary policy.
At the Madrid European Council in June 1989 it was decided on the basis of the Delors Report that the first stage of Economic and Monetary Union should be realised on 1 July 1990.
First stage of EMU
The first stage of EMU meant that the countries should coordinate their economic policies to a greater degree. The countries should mutually oversee each other’s economies to ensure a more uniform development. The central banks should consult each other on questions of monetary policy and the countries should participate in currency cooperation in the European Monetary System (EMS), which was set up in 1979 and has now been transformed into ERM II.
December 1990 saw the start of the Intergovernmental Conference resulting in the Maastricht Treaty, which entered into force on 1 November 1993. The Maastricht Treaty contained, among other things, the legal basis for the second and third stages of EMU, and the provisions on this were very close to the proposals presented in the Delors Report.
Second stage of EMU
The transition to the second stage of EMU took place on 1 January 1994. The aim of this stage was to have a more stable and uniform development in the EU. In order to achieve this, the countries had to strive to fulfil a number of economic requirements – the convergence criteria.
The European Monetary Institute (EMI) was set up for the purpose of coordinating monetary policy by strengthening the cooperation between the Member States’ central banks and preparing for the introduction of the common currency.
At the Madrid European Council in December 1995 the date for the third stage of EMU was fixed as 1 January 1999. At the same time it was decided that the name of the common currency should be the euro and that euro banknotes and coins should be introduced in 2002 at the latest.
In May 1998 the Heads of State or Government decided at a meeting in Brussels that the third stage of EMU could be introduced at the beginning of 1999 in 11 Member States: Belgium, Finland, France, the Netherlands, Ireland, Italy, Luxembourg, Portugal, Spain, Germany and Austria.
Third stage of EMU
The third stage of EMU thus began on 1 January 1999 for the 11 participating countries (Greece was not admitted until 1 January 2001). This stage meant that the participating states fixed their exchange rates irrevocably and introduced the euro.
At the same time the European System of Central Banks and the European Central Bank, which replaced the European Monetary Institute (EMI), were set up. The common monetary and exchange rate policy of the countries is complemented by the fact that the countries are obliged to coordinate their economic policies as a matter of common interest. The countries participating in the third stage are obliged to comply with the provisions contained in the Treaty and the Statute of the European System of Central Banks (ESCB), and have to have achieved a high degree of sustainable economic convergence.
On 1 January 2002 eurocoins and euronotes were introduced in the euro area and as of 28 February 2002 the euro was the only legal means of payment in the euroarea.
Sidst opdateret: 24-07-2008 - ANSJ