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25-581: The economic and monetary union (EMU) of the European Union is a group of policies aimed at converging the economies of member states of the European Union at three stages. There are three stages of the EMU, each of which consists of progressively closer economic integration. Only once a state participates in the third stage it is permitted to adopt the euro as its official currency. As such,

50-474: A serious threat to Social Europe. In the negotiation process, member states advocated different solutions depending on their political and political characteristics, while the result was a broad compromise. In December 2012, at the height of the European sovereign debt crisis , which revealed a number of weaknesses in the architecture of the EMU, a report entitled "Towards a genuine Economic and Monetary Union"

75-554: A sovereign currency. This is what happened to Greece, Ireland, Portugal, Cyprus, and Spain. Being of the opinion that the pure austerity course was not able to solve the Euro-crisis, French President François Hollande reopened the debate about a reform of the architecture of the Eurozone . The intensification of work on plans to complete the existing EMU in order to correct its economic errors and social upheavals soon introduced

100-515: Is effected centrally from the ECB. 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 treaty), the mechanism means a member state could effectively 'run out of money' to finance spending. This is characterized as a sovereign debt crisis where a country is without the possibility of refinancing itself with

125-568: The Council , European Commission , ECB , Eurogroup and European Parliament . The report outlined a roadmap for further deepening of the EMU, meant to ensure a smooth functioning of the currency union and to allow the member states to be better prepared for adjusting to global challenges: All of the above three stages are envisaged to bring further progress on all four dimensions of the EMU: The Historical Archives of

150-744: The European Central Bank published the minutes, reports and transcripts of the Committee for the Study of Economic and Monetary Union ('Delors Committee') in March 2020. Economic and monetary union Territories of the United States , Australian External Territories and New Zealand territories each share a currency and, for the most part, the market of their respective mainland states. However, they are generally not part of

175-560: The European System of Central Banks (ESCB), which would become responsible for formulating and implementing monetary policy. The three stages for the implementation of the EMU were the following: There have been debates as to whether the Eurozone countries constitute an optimum currency area . There has also been significant doubt if all eurozone states really fulfilled a "high degree of sustainable convergence" as demanded by

200-535: The Maastricht Treaty (the Treaty on European Union). The EMU involves four main activities. The first responsibility is to be in charge of implementing effective monetary policy for the euro area with price stability. There is a group of economists whose only role is studying how to improve the monetary policy while maintaining price stability. They conduct research, and their results are presented to

225-405: The EMU ensures that the single market runs smoothly. The member countries respect the decisions made by the EMU and ensure that their actions will be in favor of a stable market. Finally, regulations of the EMU aid in supervising and monitoring financial institutions. There is an imperative need for all members of the EMU to act in unison. Therefore, the EMU has to have institutions supervising all

250-670: The Heads of State or Government at their summit meeting in The Hague in 1969 to draw up a plan by stages with a view to creating an economic and monetary union by the end of the 1970s. On the basis of various previous proposals, an expert group chaired by Luxembourg's Prime Minister and Finance Minister, Pierre Werner , presented in October 1970 the first commonly agreed blueprint to create an economic and monetary union in three stages (Werner plan). The project experienced serious setbacks from

275-524: The Maastricht treaty as condition to join the Euro without getting into financial trouble later on. Since membership of the eurozone establishes a single monetary policy and essentially use of a 'foreign currency' for the respective states, they can no longer use an isolated national monetary policy as an economic tool within their central banks. Nor can they issue money to finance any required government deficits or pay interest on government bond sales. All this

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300-604: The background of an increased economic division due to a number of new nation states in Europe after World War I. In 1957 at the European Forum Alpbach , De Nederlandsche Bank Governor Marius Holtrop argued that a common central-bank policy was necessary in a unified Europe, but his subsequent advocacy of a coordinated initiative by the European Community's central banks was met with skepticism from

325-713: The crises arising from the non-convertibility of the US dollar into gold in August 1971 (i.e., the collapse of the Bretton Woods System ) and from rising oil prices in 1972. An attempt to limit the fluctuations of European currencies, using a snake in the tunnel , failed. The debate on EMU was fully re-launched at the Hannover Summit in June 1988, when the ad hoc Delors Committee of the central bank governors of

350-436: The euro. The EMU policies cover all European Union member states. All new EU member states must commit to participate in the third stage in their treaties of accession and are obliged to enter the third stage once they comply with all convergence criteria. Twenty EU member states, including most recently Croatia , have entered the third stage and have adopted the euro as their currency. Denmark , whose EU membership predates

375-610: The heads of the National Bank of Belgium , Bank of France and Deutsche Bundesbank . A first concrete attempt to create an economic and monetary union between the members of the European Communities goes back to an initiative by the European Commission in 1969, which set out the need for "greater co-ordination of economic policies and monetary cooperation," which was followed by the decision of

400-425: The implementation of monetary and fiscal policies. They will advise countries to have greater coordination, even if that means having countries tightly coupled with looser monetary and tighter fiscal policy. Not coordinating the monetary market could result in risking an unpredictable situation. The EMU also deliberates on a mixed policy option, which has been shown to be beneficial in some empirical studies. Thirdly,

425-606: The introduction of the euro, has a legal opt-out from the EU Treaties and is thus not required to enter the third stage. The idea of an economic and monetary union in Europe was first raised well before establishing the European Communities . For example, the Latin Monetary Union existed from 1865 to 1927. In the League of Nations , Gustav Stresemann asked in 1929 for a European currency against

450-587: The keyword "genuine" EMU. At the beginning of 2012, a proposed correction of the defective Maastricht currency architecture comprising: introduction of a fiscal capacity of the EU , common debt management and a completely integrated banking union , appeared unlikely to happen. Additionally, there were widespread fears that a process of strengthening the Union's power to intervene in eurozone member states and to impose flexible labour markets and flexible wages, might constitute

475-452: The leaders of the EMU. Thereafter, the role of the leaders is to find a suitable way to implement the economists' work into their country's policies. Maintaining price stability is a long-term goal for all states in the EU, due to the effects it might have on the Euro as a currency. Secondly, the EMU must coordinate economic and fiscal policies in EU countries. They must find an equilibrium between

500-613: The member states to protect the main aim of the EMU. The economic roles of nations within the EMU are to: Spaak method The Spaak method of negotiation is named after Paul-Henri Spaak , a Belgian politician, who applied this method at the Intergovernmental Conference on the Common Market and Euratom in 1956 at Val Duchesse castle in preparing for the Treaties of Rome in 1957. During

525-579: The negotiations leading to the conference at Val Duchesse, most of the real negotiations took place prior to the actual Intergovernmental Conference (IGC) within the Spaak Committee that was charged with setting the agenda for the Val Duchesse conference. The final report of the committee then formed the basis for the final treaty which was then approved in Rome . Within this negotiating method,

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550-587: The same customs territories . Several countries initially attempted to form an EMU at the Hague Summit in 1969. Afterward, a "draft plan" was announced. During this time, the main member presiding over this decision was Pierre Werner , Prime Minister of Luxembourg . The decision to form the Economic and Monetary Union of the European Union (EMU) was accepted in December 1991, which later became part of

575-563: The third stage is largely synonymous with the eurozone. The euro convergence criteria are the set of requirements that needs to be fulfilled in order for a country to be approved to participate in the third stage. An important element of this is participation for a minimum of two years in the European Exchange Rate Mechanism ("ERM II"), in which candidate currencies demonstrate economic convergence by maintaining limited deviation from their target rate against

600-517: The twelve member states, chaired by the President of the European Commission , Jacques Delors , was asked to propose a new timetable with clear, practical and realistic steps for creating an economic and monetary union. This way of working was derived from the Spaak method . The Delors report of 1989 set out a plan to introduce the EMU in three stages and it included the creation of institutions like

625-521: Was issued by the four presidents of the Council, European Commission, ECB and Eurogroup. The report outlined the following roadmap for implementing actions being required to ensure the stability and integrity of the EMU: In June 2015, a 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

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