- Read a few of our sample essays on your topic
- Develop your own ideas
- Your paper will practically write itself
The Maastricht Treaty mentions EMU and refers to it together with the Single Market as one of the means by which the Union will promote economic and social progress that is balanced and sustainable. The treaty refers to the irrevocable fixing of a single currency, the ECU, and a single monetary policy and exchange rate policy.
The first stage began on 1 July 1990 with the removal of exchange controls in 8 of the then 12 Member States, the inclusion in principle of all currencies in the narrow band of the Exchange-Rate Mechanism (ERM), and measures to encourage convergence. No new institutions were required. The second stage began on 1 January 1994, with the newly created European Monetary Institute (EMI), based in Frankfurt, gradually assuming a coordinating role.
Those countries that qualified undertook stage 3 of EMU in early 1999. At the beginning of Stage 3 the participating states adopted the 'irrevocably fixed' rates at which the Euro was to be substituted for national currencies. Stage 3 also entailed the creation of a European System of Central Banks (ESCB), composed of the European Central Bank (ECB) and representatives of the national central banks.
The value of the euro will be determined by economic conditions in the euro area and particularly by maintaining price stability. Countries will only be allowed to join Economic and Monetary Union when their economic conditions have converged toward those in the euro area so that their entry should not impact significantly on the value of the euro. During a three-year transition period, 1999-2002, European companies will convert their accounts to euros. Then, in 2002, euro notes and coins will be circulated in the different countries. There will, of course, be much bickering over the use of national symbols (should the queen's head be conjoined with the body of a bird?), or whether coin sizes will fit into national telephones and vending machines.
In May 1998, bilateral exchange rates between participating currencies were introduced. This was done to help guide the financial markets in the time up to the launch of the euro on January 1, 1999 by indicating that the bilateral rates were the proper economic basis for determining the irrevocable conversion rates between the euro and participating national currencies. The currencies not participating in the euro area from the outset did not have fixed exchange rates, either against the participating currencies or against the euro. Presently, they may participate in a new exchange rate mechanism, which will define central rates against the euro with a standard fluctuation band of up to 15% around that central rate.
With the Jan.1 launch of the euro, the common currency uniting 11 countries, Europe posed the first challenge to the U.S. dollar's dominance of international trade and finance. The euro should not be confused with the European Currency Unit (ECU), which was a just a basket of currencies tied together. The advent of European economic and monetary union, known as EMU, doesn't just change the world's financial landscape; it could also alter the global balance of power. That means stock exchanges will trade in euros and large businesses will keep track of finances in the euro. To ease the transition, bank customers can keep accounts in euros. The size of the new currency bloc -- with 290 million inhabitants -- will provide a stable economic and business environment. The EMU gives birth to a market as big as the United States and backed by a single currency. It represents twenty percent of world economic output and eighteen percent of world trade. The euro could quickly lead to huge capital flows in Europe, making the European firms more competitive in the global marketplace. Businesses will save money; the costs of changing currencies from country to country will be sharply reduced. Comparing prices will be quicker and interest rates will stabilize. All this will make long-term planning easier. The member countries are Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
There have been questions about the EMU's strength and sustainability. In part, this plan for
Quotes talked about in this paper
- The ECB keeps interest rates higher than justified by unemployment in order to maintain credibility and investor "confidence" ...
Terminology mentioned in this research paper
Central Banks, inflation rate, bank statements, GDP,
Names talked about in this paper
Organizations included in this essay
European Central Bank, European Union, European Monetary Institute, European Currency Unit, ECU, EMU, ERM, Wall Street Journal, U.S. Federal Reserve System,
Locations talked about in this research material
Europe., United States, member countries, Italy, Ireland, Germany, France, Frankfurt, Spain, Finland, United Kingdom, Russia, new enterprises, Asia, Denmark, Tokyo, America, China, Sweden,
Companies included in this research paper
ECB, EMI, Gartner Group, Moody, financial institutions,
Keywords referenced in this research paper
euro, the euro, currency, monetary policy, market, single currency, reserve currency, exchange rate, Europe, rates, currencies, central bank, United States, economic and monetary union, European Central Bank, euro notes, world reserve currency, single market, price stability, European economic and monetary union, exchange rate policy, single european market, money supply, slow growth, single european currency, European Currency Unit, European Monetary Institute, prices, economic growth, trade, hard currency reserves, world currency, currency risk, goods and services, common currency, core countries, growth and stability pact, international monetary system, investors, a single, interest rates, policies, trade deficits, financial, financial markets, macroeconomic policies, inflation rate, stock exchanges, European nations, exchange rate mechanism,