Economic and monetary union
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EMU is established through a currency-related trade pact and the sixth stage of economic integration. An intermediate step between pure EMU and a complete economic integration is the fiscal union. An EMU is distinguished from a mere monetary union (e.g. the Latin Monetary Union in the 19th century), which does not involve a common market.
Additionally the autonomous and dependent territories, such as some of the EU member state special territories, are sometimes treated as separate customs territory from their mainland state or have varying arrangements of formal or de facto customs union, common market and currency union (or combinations thereof) with the mainland and in regards to third countries through the trade pacts signed by the mainland state.
History and the first step
The first conversation about creating some form of union started in 1969 at the summit in the Hague. Then the group of the heads of member states or the heads of the government with the main member Pierre Werner, Prime Minister of Luxemburg, announced a draft which should represent a straight way to the full economic and monetary union within 10 years.
The serious problem get into the way in terms of the colaps of the Bretton Woods system and the US decision to float the dollar in mid-1971. The EMU project got the straight stop. The estabilishment came in 1978 at the Brussels Summit, in a form of the European Monetary System. It was based on fixed but adjustable exchange rate. The currencies of all the Member States, except the UK, participated in the exchange rate mechanism, ERM I. The work of ERM I. was tangible over the years. In 1988, the Hanover European Council set up a committee to study EMU under the chairmanship of Jacques Delors, the then Commission President. The result was, there is needed to strengthen up the EMU in terms of the better coordination of economic policies, rules covering national budget deficits and a new instititution which would have response about the EMU.
The decision to form EMU was accepted in December 1991 and later became part of the Maastricht Treaty (the Treaty on European Union). The Treaty introduces the EMU in 3 stages:
- Stage 1: the free movement of capital between Member States;
- Stage 2: convergence of Member States’ economic policies and strengthening of cooperation between Member States’ national central banks. The national central banks were to become independent during this stage;
- Stage 3: the gradual introduction of the euro as the single currency of the Member States and the implementation of a common monetary policy under the aegis of the ECB. The budgetary rules were to become binding.
The EMU involves 4 main activities
- implementing an effective monetary policy for the euro area with the objective of price stability - there is a group of economists who have only one role to study how to improve the monetary policy and the price stability. They have to make reasearches and their results introduce to leaders of the EMU. Then the role of the leaders is to find an appropriate way how to implement their work into each states policy. To object the price stability is the long-term goal of all states in the EMU because of the future view of one currency the EURO.
- coordinating economic and fiscal policies in EU countries - the role of the EMU at this point is to find the equilibrium between the monetary and the fiscal policies. They tried to adviced whether it is more efficient to use greater coordition even if it is tightly coupled with looser money and tighter fiscal policy or to non-coordinate the monetary market and have a risk of unpredictable situation. They have to deliberate also the option of mixed policy which, like it was shown in some empirical studies, can have more benefits that is generaly expected.
- ensuring the single market runs smoothly - the main conditions of the third point is that all member countries will respect the decisions made by EMU and also by their own steps will be act in favor of stable market
- supervising and monitoring financial institutions - as the point above said, there is a strict need of acting in a unit way for all members of EMU. Therefore the EMU has to have the institutions which will supervised all of the member states and will protect the main aim of EMU
The role of the national governments
- control fiscal policy that concerns government budgets
- control tax policies that determine how income is raised
- control structural policies that determine pension systems, labour- and capital-market regulations
List of economic and monetary unions
- Economic and Monetary Union of the European Union (1999/2002) with the Euro for the Eurozone members
- de facto the OECS Eastern Caribbean Currency Union with the East Caribbean dollar in the CSME (2006)
- de facto Switzerland–Liechtenstein
|Economic and Monetary Community of Central Africa (CEMAC)||Central African CFA franc||Africa||not yet functioning common market|
|West African Economic and Monetary Union (UEMOA)||West African CFA franc||Africa||not yet functioning common market|
|Gulf Cooperation Council (GCC)||Khaleeji||Middle East||Possibly gold backed, but postponed due to the financial crisis.|
|East African Community (EAC)||East African shilling||Africa||2015||To be used by the future East African Federation|
|Caribbean Single Market and Economy (as part of the CARICOM)||Latin America
|2015||To supplement the OECS Eastern Caribbean Currency Union|
|Southern African Customs Union (SACU)||South African Rand||Africa||2015||de facto for the CMA member when the SADC economic union is established|
|Southern African Development Community (SADC)||South African Rand
|Africa||2016||To supplement or succeed the CMA and Southern Africa Customs Union|
|South Asian Association for Regional Cooperation||South Asia||2016|
|Union of South American Nations (UNASUR)||Latino||Latin America
|Economic Community of Central African States (ECCAS)||Africa||To supplement the Economic and Monetary Community of Central Africa (CEMAC)|
|Economic Community of West African States (ECOWAS)||Africa||To succeed UEMOA and WAMZ|
|African Economic Community||Africa||2028||See African Monetary Union|
|Union State of Russia and Belarus||Russian ruble||Europe|
|Arab League||Arab Dinar||Arab states||Arab Dinar has been proposed ever since the creation of the Arab Monetary Fund, expected for serious plans of doing so, after the creation of the proposed Arab Union.|
|Eurasian Economic Union||Altyn||Eurasia||2025||Kazakhstani President Nursultan Nazarbayev had first proposed, in 2009, the creation of a common noncash currency called "yevraz" for the Eurasian Economic Community. It would have reportedly helped insulate the countries from the global economic crisis. In 2012, the idea of the new joint currency found support from Vladimir Putin and Dmitry Medvedev and by 2014 proposals were drafted in Eurasian Commission documents for the establishment of a Eurasian Central Bank and a common currency to be called the altyn which is to be introduced by 2025.|
- North American Union and North American Currency Union (Amero)
- Pacific Union (one proposal for Australian dollar)
- EU Overseas countries and some other territories participate partially in the EU single market per part four of the Treaty Establishing the European Community; Some EU Outermost regions and other territories use the Euro of the currency union, others are part of the customs union; some participate in both unions and some in neither.
Territories of the United States, Australian External Territories and Realm of New Zealand territories share the currency and mostly also the market of their respective mainland state, but are generally not part of its customs territory.
- "History of economic and monetary union | Fact Sheets on the European Union | European Parliament". www.europarl.europa.eu. Retrieved 2019-05-04.
- "What is the Economic and Monetary Union? (EMU)". European Commission - European Commission. Retrieved 2019-05-04.
- "How the Economic and Monetary Union works". European Commission - European Commission. Retrieved 2019-05-04.
- Blinder, Alan (September 1982). "Issues in the Coordination of Monetary and Fiscal Policy". Cambridge, MA.
- "The EU and economic and monetary union". publications.europa.eu. Retrieved 2019-05-04.
- The states participating in both initiatives are Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines.
- Single market through participation in the internal market of the European Union, customs union since 1924, informal currency union since 1920.
- Proposed by Ecuador's President Rafael Correa on December 15, 2007
- "Kazakhstan Suggests a New Currency - News". The Moscow Times. Retrieved 4 June 2015.
- "Russia, Kazakhstan and Belarus to have new joint currency". Retrieved 8 July 2014.
- Not currently on any political agenda, based mostly off conspiracy theories.
- Acocella, N. and Di Bartolomeo, G. and Tirelli, P. , ‘Fiscal leadership and coordination in the EMU’, in: ‘Open Economies Review’, 18(3): 281-9.
- Bergin, Paul (2008). "Monetary Union". In David R. Henderson (ed.) (ed.). Concise Encyclopedia of Economics (2nd ed.). Indianapolis: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267.CS1 maint: Extra text: editors list (link)
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- Do the Mercosur Countries Form an Optimum Currency Area?
- Argentina plans monetary union
- Quadrant Magazine article on the Pacific
- Economist – Antipodean currencies (Australia and New Zealand)
- Three Perspectives on an Australasian Monetary Union
- Reasons for the collapse of the Rouble Zone
- In Search of the "Ruble Zone"
- OECD Development Centre – the Rand Zone
- A single African currency in our time?
- South Africa proposes adoption of the rand as provisional SADC common currency