Economic and Monetary Union (EMU)

The plan for the EMU was approved as a part of the Maastricht Treaty, which was signed in February 1992 and entered into effect on 1 November 1993. The Treaty provides for transition to EMU in three stages. The plan is the result of extensive and long-standing cooperative efforts.

Stage 1

Stage 1 began at the start of July 1990, by which time nearly all barriers to capital flows had been abolished within the EU area.

Stage 2

Stage 2 began at the start of 1994. During this stage, cooperation between the participating countries in respect of economic and monetary policy was intensified and the necessary preparations were made for the launch of stage 3.

The European Monetary Institute (EMI) was established at the start of stage 2.

The European Council in June 1997 issued a resolution on the Stability and Growth Pact. The Pact clarifies the provisions of the Treaty concerning excessive budget deficits and strengthens the mutual surveillance of EU countries' economic policies.

The countries participating in stage 3 as from 1 January 1999 were chosen on 2 May 1998.

The European Central Bank (ECB) was established on 1 June 1998, at which time the EMI was disbanded.

Stage 3

At the start of Stage 3 on 1 January 1999, the conversion rates between the currencies of the countries participating in the euro area were irrevocably fixed and the euro was adopted as the area's single currency.

With the onset of Stage 3, there was a fundamental change in the position of the participating countries' central banks. National monetary policies were replaced by the single monetary policy of the ECB. The national central banks can influence ECB decision-making through the Governing Board of the ECB.

EU member states that are not participating in the euro area may join Stage 3 of the EMU later, after they fulfil the prescribed convergence criteria. These criteria are related to price level, public sector budget position and indebtedness, exchange rates, and level of interest rates.