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Economic and Monetary Union


Europe’s economic integration has made great strides since the founding Treaties (European Coal and Steel Community (1952); European Economic Community and European Atomic Energy Community (1958)). Initially, the emphasis was on commercial and agricultural policy as well as on customs. However, the scope of the common policies was gradually extended over the years, leading ultimately to greater political, as well as economic, cooperation. The establishment of the internal market in 1993 and Economic and Monetary Union in 1999 are milestones in Europe’s economic unification process.

The number of Member States has also increased since the founding Treaties, from the original six to 25 in four enlargement rounds in 1973, 1981, 1995 and 2004. Twelve of these countries are already participating in the common currency: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

With the introduction of the euro on 1 January 1999, the European Central Bank (ECB) assumed responsibility for monetary policy. Together with the central banks of the participating countries, the ECB forms the European System of Central Banks (ESCB), whose main task is to ensure price stability in Europe. The Member States retain responsibility for shaping economic policy, although the EU Treaty requires them to regard their economic policies as a matter of common concern and to coordinate them among themselves. This is mainly achieved by means of the Broad Economic Policy Guidelines, which contain recommendations for the economic policy of the Community and the Member States. Furthermore, the Stability and Growth Pact requires Member States to pursue a sound, responsible budgetary policy. They must avoid excessive deficits and undertake to comply with the medium-term objective of budgetary positions close to balance or in surplus. This policy ensures that, in addition to the ECB, the countries participating in the common currency contribute towards the stability and credibility of the euro.

 

Date: 20.12.2005