The EMU INS and the EMU OUTS : Maastricht and beyond

Abstract

The long period of doubts, uncertainty and speculation regarding the introduction of the Economic and Monetary Union (EMU) in Europe is now over. The Brussels European Summit of May 1998 confirmed that the EMU will be launched according to the time schedule laid by the Maastricht Treaty (MT) back in 1991. Furthermore, the Summit adopted the recommendations of the European Commission and the European Monetary Institute (EMI) regarding the countries which should form the first wave of EMU participants. The 1st of January 1999 is the date of birth of the new currency, the euro, and of the EMU which includes eleven out of the fifteen members of the European Union (EU). The MT was the last in a series of attempts to promote monetary integration in Europe which started immediately after the collapse of the Bretton Woods system in August 1971. It followed the short-lived Snake Arrangement in the mid-1970s and the creation of the European Monetary System (EMS) in 1979. However, the EMU project is much more ambitious, simply because it involves the abolition of national currencies and their replacement with the euro. According to the MT, the sole responsible for the conduct of monetary policy within the EMU will be the European System of Central Banks (ESCB) with the European Central Bank (ECB) being its centre point. The role of the national central banks (CBs) will be limited to the execution of the ECB policy guidelines and the promotion of financial stability in individual countries. For good or bad, these changes are of paramount importance. By deciding to introduce the single currency in 1999, the European governments have crossed the Rubicon. Hence, a new economic reality has been created in the continent and that would affect, in various ways, both the EMU Ins as well as the EMU Outs. Furthermore, it will certainly affect the economic policy of those countries which aspire to become EU members at the turn of the century.