European Economic and Monetary Union (EMU)

Union économique et monétaire (UEM)

Founded

1999-01-01

History

1 Jan 1999, when the 'euro' became currency of 11 of the then 15 member states of F-XF2147 - European Union (EU) as laid down by T-XT9113 - Treaty on European Union (Maastricht Treaty), signed 7 Feb 1992. Greece became the 12th member on 1 Jan 2001. Slovenia introduced the euro in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014 and Lithuania in 2015. These countries are collectively referred to as Euro Zone. As from 1 Jan 2002, following a 3-year transition period to 31 Dec 2001, banks in these countries issue only euro notes and coins.

EMU was first proposed 1-2 Dec 1969, The Hague (Netherlands), at Summit Conference of Heads of Government and of State of the H-XF0662 - European Communities (EC), within the framework of E-XE3068 - Council of the European Union, as a long-term project to be achieved in stages. It was reconfirmed at subsequent meetings and in reports, notably the Werner report of 1971 and the Delors Report, 1989. The Delors Committee -- Comité Delors, created Jun 1988, comprising presidents of the central banks of the then 12 EEC member states in their personal capacities and several independent personalities, was an 'ad hoc' committee set up by E-XE7976 - European Council to discuss EMU. The Delors Committee suggested 3 stages but without fixing a timetable. (1) From 1 Jul 1990, full liberalization of capital movement would come into effect, with all currencies being integrated in the U-XF7870 - European Monetary System (EMS). (2) EU member states would sign a treaty instituting EMU and aiming at setting up a European System of Central Banks as well as reinforcing convergence of economic policies. (3) Parities would be permanently fixed, and the European System of Central Banks established, thus opening the way to replacement of their national currencies by a single currency. F-XF0667 - European Parliament (EP) proposed a swifter timetable, installing EMU by 1 Jan 1995, with the complete disappearance of national currencies by 1 Jan 1998. A secretariat responding to H-XE7137 - Committee of Governors of the Central Banks of the Member States of the European Economic Community monitored national financial economies and helped create the climate for progressive integration of the European economy. The overall design of a plan for economic and monetary union was agreed, Aug 1990, by Council of Finance Ministers of the European Union (Ecofin); but several complex issues remained to be resolved. The European Council, meeting 27-28 Oct 1990, Rome (Italy), set out a timetable agreed by all members except the UK, which led to finalizing a first phase by 31 Dec 1993, a maximum of 3 years later for finalizing a second phase and the passage to a third phase occurring in a "reasonable" time. The process involved strengthening the ability of Community institutions to act towards economic union and creation of a new monetary institution, E-XF2923 - European Central Bank (ECB), fully responsible for monetary policy and with the aim of maintaining price stability. Exchange rates would eventually be irrevocably fixed and the Community would have a single currency.

The Maastricht Treaty put the future establishment of the European Central Bank and F-XF2712 - European System of Central Banks (ESCB) on a firm footing. It formalized the setting up, 1 Jan 1994, of H-XF2874 - European Monetary Institute (EMI), whose Council comprised the Governors of European central banks and which took over the tasks of their Committee and of the H-XF0093 - European Monetary Cooperation Fund (EMCF). The Institute functioned during the second stage of the run-up towards union, monitoring progress of the European Monetary System, The second stage was designed to ensure that differences in national economic indicators disappeared as inflation, interest rates, exchange fluctuations, budget and public sector deficits converged with those of the best performing economies, with Ecofin intervening if national budget policies were inconsistent with Maastricht Treaty provisions. A U-XE1969 - Monetary Committee was set up to promote coordination of the policies of member states. This was superseded by an Economic and Financial Committee (EFC) at the beginning of the third stage, when the EMI was superseded by establishment of the European Central Bank. No date for the third stage had been fixed by 31 Dec 1997, so ESCB was established immediately after 1 Jul 1998 and Stage 3 followed on 1 Jan 1999, with establishment of the EMU as transition to the third stage occurred automatically on this date for those member states which had fulfilled the necessary conditions for the adoption of a single currency.

A Resolution of the European Council, 16 Jun 1997, Amsterdam (Netherlands), established an exchange-rate mechanism in the third stage of EMU; and agreement of 1 Sep 1998 between the European Central Bank and the National Central Banks of member states outside the euro area laid down operating procedures. Under the European Council resolution, a new Exchange-Rate Mechanism (ERM II) replaced the European Monetary System as from 1 Jan 1999, when Economic and Monetary Union became official and the EMS became obsolete. ERM II aims to maintain exchange-rate stability between the euro and participating national currencies so as to ensure that excessive exchange-rate fluctuations do not cause problems in the internal market.

Aims

Coordinate economic policy-making between Member States; coordinate fiscal policies, notably through limits on government debt and deficit; promote the single currency and the euro area.

Activities

Relations with Inter-Governmental Organizations

Relations with Non-Governmental Organizations

Publications

Members

Type I Classification

Type II Classification

Subjects ^*

UN Sustainable Development Goals ^**

UIA Org ID

XF4335