The framework for cooperation on economic policy is the economic and monetary union (EMU), of which all EU countries are part. It is the context within which they agree common guidelines for questions of importance for the economy. The overall result is more growth, more jobs and a higher level of social welfare for all. In addition, this cooperation enables the EU to react to global economic and financial challenges in a coordinated way. It makes the EU as a trading block more resilient to shocks from the outside and enables the bloc to deal with economic and financial problems more effectively.
Sending money to children studying abroad is cheaper thanks to the EU.
Tackling the crisis together
The EU has taken a coordinated response to the current financial and economic crisis since it began in October 2008. National governments, the European Central Bank (ECB) and the Commission have been working together to protect savings, maintain a flow of affordable credit for businesses and households and put in place a better financial governance system worldwide. The aim is not just to restore stability, but to create the conditions for a relaunch of growth and job creation.
So far, EU governments have pumped more than €2 trillion into the rescue effort. EU leaders coordinated interventions, supporting banks and allowing guarantees for lending. The EU also increased national guarantees for individuals’ savings accounts to a minimum of €50 000.
The benefits of the euro
Having the euro as a common currency for a large part of Europe has been very helpful during the crisis. It has made it easier for the EU to react to the global credit crunch in a coordinated way and it provided more stability than would otherwise have been possible. For example, as the ECB was able to reduce interest rates for the entire euro area (instead of each country setting its own exchange rate), banks throughout the EU now have the same conditions for borrowing from, and lending money to, each other.
The euro is used daily by more than 60% of EU citizens. The single currency benefits everybody: the cost of changing money when travelling or doing business within the euro area has disappeared; the cost of making cross-border payments has in most cases either disappeared or been reduced significantly; consumers and businesses can compare prices more readily, which stimulates competition.
Being in the euro area is a guarantee of price stability. The ECB sets key interest rates at levels designed to keep euro area inflation below 2% in the medium term. It also manages the EU’s foreign exchange reserves and can intervene in foreign exchange markets to influence the exchange rate of the euro.
The euro for all Europeans
All EU countries are expected to introduce the euro, but only when their economies are ready. The countries that became EU members in 2004 and 2007 are therefore gradually joining the euro area, while Denmark and the United Kingdom do not currently use the euro due to special political agreements. To join the euro area, a country's old currency must have had a stable exchange rate for two years. Other conditions relate to interest rates, budget deficits, inflation rates and the level of government debt.
Making cross-border payments cheaper
The ECB not only has the job of keeping prices stable, but also of ensuring that cross-border euro transfers are as cheap as possible for banks and their customers.
A real-time payments system known as TARGET and operated by the ECB and national central banks does this for very large sums of money. It will also offer the same advantages in future to transactions in securities.
The ECB and the European Commission are working jointly on creating a Single Euro Payments Area (SEPA) to extend the benefits of more efficient and cheaper payments. Ultimately all euro payments, however they are made – by bank transfer, by direct debit or by card – will be treated exactly the same. It will not matter whether the payment is domestic or cross-border. The EU is currently extending the benefits to direct debit payments.
