Launched inEMU involves the coordination of economic and fiscal policies, a common monetary policy, and a common currency, the euro. What is the Economic and Monetary Union? Greece accepted two bailouts from the EU in five years, and short of leaving the EMU, future bailouts will be necessary for Greece to continue to pay its creditors.
Criticism[ edit ] There have been debates as to whether the Eurozone countries constitute an optimum currency area.
The Treaty of Paris was not a permanent treaty, and was set to expire in On 1 Junethe European Central Bank ECB is created, and on 31 Decemberthe conversion rates between the 11 participating national currencies and the euro are established.
The Delors report of set out a plan to introduce the EMU in three stages and it included the creation of institutions like the European System of Central Banks ESCBwhich would become responsible for formulating and implementing monetary policy. This has been completed by all initial EU members except for the United Kingdom and Denmark, who have opted out of adopting the euro.
The debate on EMU was fully re-launched at the Hannover Summit in Junewhen an ad hoc committee Delors Committee of the central bank governors of the twelve member states, chaired by the President of the European CommissionJacques Delorswas asked to propose a new timetable with clear, practical and realistic steps for creating an economic and monetary union.
Together, these countries make up the euro area. It is a means to provide stability and for stronger, more sustainable and inclusive growth across the euro area and the EU as a whole for the sake of improving the lives of EU citizens.
On September 9, Gustav Stresemann, at an assembly of the League of Nations, asked, "Where are the European currency, the European stamp that we need?
As a result, the euro area architecture is now much more robust than before. An attempt to limit the fluctations of European currencies, using a snake in the tunnelfailed. The EU has given Greece an ultimatum: Black markets and other signs of a failed economy would appear.
Deepening the Economic and Monetary Union Deepening the Economic and Monetary Union Following the outbreak of the economic and financial crisis, the European Union took unprecedented measures to strengthen the Economic and Monetary Union and make sure that Europe is better prepared for future shocks.
For example, the Latin Monetary Union existed from European Monetary Union and the European Sovereign Debt Crisis Adoption of the euro forbids monetary flexibility, so that no committed country may print its own money to pay off government debt or deficitor compete with other European currencies.
On 1 Januarythe euro notes and coins are introduced. The Treaty of Maastricht in establishes the completion of the EMU as a formal objective and sets a number of economic convergence criteriaconcerning the inflation rate, public finances, interest rates and exchange rate stability.
Whilst all 28 EU Member States take part in the economic union, some countries have taken integration further and adopted the euro.
On 3 Mayat the European Council in Brussels, the 11 initial countries that will participate in the third stage from 1 January are selected. However, further work lies ahead to make sure that the benefits of the Economic and Monetary Union reach all EU citizens.
The report outlined the following roadmap for implementing actions being required to ensure the stability and integrity of the EMU: A first attempt to create an economic and monetary union between the members of the European Communities goes back to an initiative by the European Commission inwhich set out the need for "greater co-ordination of economic policies and monetary cooperation,"  which was followed by the decision of the Heads of State or Government at their summit meeting in The Hague in to draw up a plan by stages with a view to creating an economic and monetary union by the end of the s.
The treaty enters into force on the 1 November The EMU was to include a common economic and monetary union, a central banking system, and a common currency.
As a consequence, if member states do not manage their economy in a way that they can show a fiscal discipline as they were obliged by the Maastricht treatythey will sooner or later risk a sovereign debt crisis in their country without the possibility to print money as an easy way out.
A three-year transition period begins before the introduction of actual euro notes and coinsbut legally the national currencies have already ceased to exist.
The intensification of work on plans to complete the existing EMU in order to correct its economic errors and social upheavals soon introduced the keyword "genuine" EMU.
The new Greek central bank might be tempted to print money to maintain basic services, which could lead to severe inflation or, in the worst case scenario, hyperinflation. European debt crisis Since membership of the eurozone establishes a single monetary policy for the respective states, they can no longer use an isolated monetary policy, e.
Consequently, all member states were able to borrow in euros at low interest rates during the period before the global financial crisis, but bond yields did not reflect the different credit-worthiness of member countries.
On 16 Decemberdetails such as the name of the new currency the euro as well as the duration of the transition periods are decided.
The project experienced serious setbacks from the crises arising from the non-convertibility of the US dollar into gold in August i.
Schuman argued that the only way to ensure peace in Europe, which had been torn apart twice in thirty years by devastating wars, was to bind Europe as a single economic entity: Monetary policy inflexibility[ edit ] Further information: The cost of imports, on which Greece is very dependent, would increase dramatically as the buying power of the drachma declines relative to the euro.Departmental Papers / Policy Papers Related Links.
Euro Area and the IMF; How to order IMF Publications Revisiting the Economic Case for Fiscal Union in the Euro Area. Author/Editor: the drive to complete Europe’s Economic and Monetary Union (EMU) had stalled, and the way forward will benefit from an in-depth look at the conceptual.
In Junea follow-up report entitled "Completing Europe's Economic and Monetary Union" (often referred to as the ""Five Presidents Report") was issued by the presidents of the Council, European Commission, ECB, Eurogroup and European Parliament.
Policy Analysis. ISBN. The European Economic and Monetary Union (EMU) combined the European Union member states into a cohesive economic system.
It is the successor to the European Monetary System (EMS). Economic growth in the euro area is set to continue at a relatively dynamic pace of just above 2 per cent over Accommodative monetary policy, fiscal support and improving labour markets are supporting domestic demand, notably through dynamic private consumption.
Investment is strengthening. In Marchfollowing an invitation from the European Commission, the IIEA Economic Governance Group made a submission on the Analytical Note, Preparing for Next Steps on Better Economic Governance in the Euro Area of 12 February Subsequently, the Five Presidents’ Report, Completing Europe’s Economic and Monetary Union was published on 22 June Optimum Currency Area Theory and EMU: An Analysis of the Eurozone’s Development, Crisis and Future Following Europe’s decision to move towards Economic and Monetary Union (EMU) the theory of Optimum Currency Areas (OCA) emerged as a popular tool of analysis.