Economic and Monetary Union (EMU)
Economic and monetary union (EMU) is the process of harmonising the economic and monetary policies of the Member States of the Union with a view to the introduction of a single currency, the euro. It was the subject of an Intergovernmental Conference (IGC), which concluded its deliberations in Maastricht in December 1991.
EMU was achieved in three stages:
- First stage (1 July 1990 to 31 December 1993): free movement of capital between Member States, closer coordination of economic policies and closer cooperation between central banks.
- Second stage (1 January 1994 to 31 December 1998): convergence of the economic and monetary policies of the Member States (to ensure stability of prices and sound public finances) and the establishment of the European Monetary Institute (EMI) and, in 1998, of the European Central Bank (ECB).
- Third stage (from 1 January 1999): irrevocable fixing of exchange rates and introduction of the single currency on the foreign-exchange markets and for electronic payments. Introduction of euro notes and coins.
So far, 17 of the 27 Member States of the European Union have introduced the single currency.
Three Member States did not adopt the single currency: the United Kingdom and Denmark, both of which have an opt-out clause, and Sweden, following a referendum in September 2003. The States which joined the Union on 1 May 2004 and 1 January 2007 are required to adopt the euro as soon as they meet all the convergence criteria. They were not granted opt-out clauses during the accession negotiations.
The challenges facing the long-term success of EMU are continued budgetary consolidation and closer coordination of Member States' economic policies.