An economic and monetary union (EMU) was a recurring ambition for the European Union from the late 1960s onwards. EMU involves coordinating economic and fiscal policies, a common monetary policy, and a common currency, the euro. A single currency offers many advantages: it makes it easier for companies to conduct cross-border trade, the economy becomes more stable, and consumers have more choice and opportunities.
However, a variety of political and economic obstacles barred the way: weak political commitment, divisions over economic priorities, and turbulence in international markets. These all played their role in frustrating progress towards the Economic and Monetary Union.
The international currency stability that reigned in the immediate post-war period did not last. Turmoil in international currency markets threatened the common price system of the common agricultural policy, a main pillar of what was then the European Economic Community. Later attempts to achieve stable exchange rates were hit by oil crises and other shocks until, in 1979, the European Monetary System (EMS) was launched.
The EMS was built on a system of exchange rates used to keep participating currencies within a narrow band. This completely new approach represented an unprecedented coordination of monetary policies between EU countries, and operated successfully for over a decade. However, it was under the presidency of Jacques Delors when central bank governors of the EU countries produced the 'Delors Report' on how EMU could be achieved.
The Delors Report proposed a three-stage preparatory period for economic and monetary union and the euro area, spanning the period 1990 to 1999. European leaders accepted the recommendations in the Delors Report.
The new Treaty on European Union, which contained the provisions needed to implement the monetary union, was agreed at the European Council held at Maastricht, the Netherlands, in December 1991.
After a decade of preparations, the euro was launched on 1 January 1999: for the first three years it was an ‘invisible’ currency, only used for accounting purposes and electronic payments. Coins and banknotes were launched on 1 January 2002, and in 12 EU countries the biggest cash changeover in history took place.