Economic and Monetary Union

Economic and Monetary Union (EMU) represents the final stage of economic integration in the EU. The decision to form the EMU was taken by the European Council in Maastricht in December 1991. Provisions regarding the establishment of EMU in accordance with a specific timetable were laid down in the Treaty on European Union (the Maastricht Treaty).

EMU is based on a single currency and monetary policy and the coordination of economic policies. EU Member State and the European Community must act in accordance with the following principles: stable prices, sound public finances and monetary conditions, and a sustainable balance of payments.

Regulations regarding EMU are available on the European Commission's websites.

The Maastricht Treaty laid down the three-stage process in which EMU was established: 


1 July 1990 - 31 December 1993
Stage one, which began on 1 July 1990 and ended on 31 December 1993, saw the removal of barriers to the free movement of capital (Member States were obliged to provide for the full liberalisations of capital flows).
Emphasis was also placed on the increased coordination of individual economic policies and strengthening cooperation between central banks.
Member States were also obliged to adopt measures relating to the prohibition of the financing of the public sector by the central bank and the prohibition of the public sector's privileged access to financial institutions.

1 January 1994 - 31 December 1998

The establishment of the European Monetary Institute (EMI), the predecessor to the European Central Bank (ECB), marked the start of the second stage of EMU.
The EMI was tasked with strengthening cooperation between national central banks and coordinating the monetary policies of Member States. It was also responsible for preparations required for the introduction of the single currency. In this stage, Member States were obliged to strive to meet convergence criteria.

The third stage began on 1 January 1999 with the introduction of the new single currency, the euro, and the transfer of responsibility for conducting monetary policy to the Eurosystem.

The Eurosystem comprises the ECB and the national central banks of EU Member States that have adopted the euro. The new central bank, namely the ECB, which was actually established on 1 June 1998, began operating and assumed the tasks of the EMI.

Following verification of compliance with convergence criteria for the introduction of the euro, a decision was taken as to which Member States would participate in the stage three of EMU. The conversion rates for the currencies of these countries were irrevocably fixed, the currencies becoming so-called subdivisions of the euro.

The euro was introduced as book money in the third stage. On 1 January 2002, euro bank notes and coins were introduced, replacing the banknotes and coins of those countries that adopted the euro. EU Member States must respect the rules on economic policy coordination.



More: History of economic integration in the EU