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1.2.2.3.1. What was the first step toward the implementation of the EMU?

First of all, the Genscher-Colombo Plan* and the report of the ad hoc committee of 30 June 1985, ended with a decision by the EC in Milan to call an "intergovernmental conference" for the revision of the Treaty of Rome.  The text of the agreement, dated 17 December 1985, and known by the name of the "Single Act", was approved by the European Council in Luxembourg in December 1985, and signed by the member states in February 1986, then ratified, coming into force on 1 July 1987.

1.2.2.3.2. What were the monetary objectives of the Single Act?

The principal objective of the Single Act was the establishment of a large internal European market, before 31 December 1992.  It referred to monetary problems and particularly to the EMS and the ECU as a basis for future solutions.  The result was the addition of a chapter (Article 102. A) to the Treaty of Rome, with the title "Cooperation in the field of economic and monetary policy".

1.2.2.3.3. What was the role of the Monetary Committee?

The impulse given to the technical preparation of the single currency and the progress achieved for the resolution of questions regarding the organisations which would manage the euro, particularly the European System of Central Banks (ESCB) and the ECB, owed much to the work of the Monetary Committee.  The Committee, was established as a consultative body by the European Union Treaty  (Article 109.C) and consisted of two representatives of each member state of the EC.  It brought together representatives of the European central banks, finance ministers, and the Commission.  It made preparations for meetings of the Ministerial Economic and Finance Council (Ecofin).  It was recognised that, under the direction of Sir Nigel Wicks*, the technical competence of Committee members and especially their ability to look beyond their national interests, played a decisive role in achieving European monetary union.

Sir Nigel Wicks

In January 1999, the Committee changed its name.  It is now called the Economic and Finance Committee (EFC) - or alternatively, the Eurogroup.

1.2.2.3.4. From an historical point of view, what are the principal characteristics of the European monetary construction?

They are :

• its duration : it required more than a century for the United States to establish a central bank.  The European Union, despite its cultural and linguistic diversity completed the same journey in fifty years;

• its pragmatism - which preceded political union;

• its consistency : the journey from the European Unit of Account Unit (EUA) to the euro, passing by the UA (1962) and the ECU-basket (1979) was at each stage achieved at a rate of 1 to 1.  In the moments of grave monetary crisis (1992-1993) the definition of the ECU was never put in question.  It should also be noted that the concept of stability developed first of all for the EUA (equal to the US dollar, the international reference currency) followed by a basket currency, is a significant innovation with reduced risks of exchange rated variation for importing and exporting companies.  This consistency explains why the value of the euro fluctuated for a long time at parity around the USD.

1.2.2.3.5. In comparison with past attempts at monetary union, what is the originality of EMU?

In the past, monetary agreements have either :

• been preceded by a political agreement opening the way of monetary union, the creation of a central bank, the issue of a common currency (other exception the German Münzverein*);
• been concluded to the advantage of a currency of one country, which then becomes the currency of the partner countries;
• been signed in order to assure the reciprocal circulation of money in each of the countries.

The originality of the EMU rests on the fact that the ECU first, the euro later, were created by sovereign countries in terms of monetary policies with their own central bank which, amongst other actions, issued their proper currency.

The EMU is also unique in terms of the autonomy it leaves each country to define its own economic and fiscal policies, something which permits them to offer securities under different conditions.  The big question is whether EMU will survive this oddity in the long term, without a greater convergence of economic policies and without political union.  As early as 1972 the Werner Plan called for a political union as a guarantee of the durability of a European monetary union.

It is the first time in history that so many sovereign countries have accepted the voluntary abandonment of the very symbol of their sovereignty and adopted a common form of money.  For Germans that meant the loss of the symbol of their economic success (the DEM) and for Greeks the loss of their drachma (GRD) with its 4000-year-old history.

"There may well be states without their own currency, but no durable currency without a state."
Mark Eyskens, government minister, Belgium.

For an historical summary of the history of  European monetary construction, see : www.europarl.eu.int/factsheets/5_1_0_en.htm

Show all/Hide all

1.2.2.3.1. What was the first step toward the implementation of the EMU?

First of all, the Genscher-Colombo Plan* and the report of the ad hoc committee of 30 June 1985, ended with a decision by the EC in Milan to call an "intergovernmental conference" for the revision of the Treaty of Rome.  The text of the agreement, dated 17 December 1985, and known by the name of the "Single Act", was approved by the European Council in Luxembourg in December 1985, and signed by the member states in February 1986, then ratified, coming into force on 1 July 1987.

1.2.2.3.2. What were the monetary objectives of the Single Act?

The principal objective of the Single Act was the establishment of a large internal European market, before 31 December 1992.  It referred to monetary problems and particularly to the EMS and the ECU as a basis for future solutions.  The result was the addition of a chapter (Article 102. A) to the Treaty of Rome, with the title "Cooperation in the field of economic and monetary policy".

1.2.2.3.3. What was the role of the Monetary Committee?

The impulse given to the technical preparation of the single currency and the progress achieved for the resolution of questions regarding the organisations which would manage the euro, particularly the European System of Central Banks (ESCB) and the ECB, owed much to the work of the Monetary Committee.  The Committee, was established as a consultative body by the European Union Treaty  (Article 109.C) and consisted of two representatives of each member state of the EC.  It brought together representatives of the European central banks, finance ministers, and the Commission.  It made preparations for meetings of the Ministerial Economic and Finance Council (Ecofin).  It was recognised that, under the direction of Sir Nigel Wicks*, the technical competence of Committee members and especially their ability to look beyond their national interests, played a decisive role in achieving European monetary union.

Sir Nigel Wicks

In January 1999, the Committee changed its name.  It is now called the Economic and Finance Committee (EFC) - or alternatively, the Eurogroup.

1.2.2.3.4. From an historical point of view, what are the principal characteristics of the European monetary construction?

They are :

• its duration : it required more than a century for the United States to establish a central bank.  The European Union, despite its cultural and linguistic diversity completed the same journey in fifty years;

• its pragmatism - which preceded political union;

• its consistency : the journey from the European Unit of Account Unit (EUA) to the euro, passing by the UA (1962) and the ECU-basket (1979) was at each stage achieved at a rate of 1 to 1.  In the moments of grave monetary crisis (1992-1993) the definition of the ECU was never put in question.  It should also be noted that the concept of stability developed first of all for the EUA (equal to the US dollar, the international reference currency) followed by a basket currency, is a significant innovation with reduced risks of exchange rated variation for importing and exporting companies.  This consistency explains why the value of the euro fluctuated for a long time at parity around the USD.

1.2.2.3.5. In comparison with past attempts at monetary union, what is the originality of EMU?

In the past, monetary agreements have either :

• been preceded by a political agreement opening the way of monetary union, the creation of a central bank, the issue of a common currency (other exception the German Münzverein*);
• been concluded to the advantage of a currency of one country, which then becomes the currency of the partner countries;
• been signed in order to assure the reciprocal circulation of money in each of the countries.

The originality of the EMU rests on the fact that the ECU first, the euro later, were created by sovereign countries in terms of monetary policies with their own central bank which, amongst other actions, issued their proper currency.

The EMU is also unique in terms of the autonomy it leaves each country to define its own economic and fiscal policies, something which permits them to offer securities under different conditions.  The big question is whether EMU will survive this oddity in the long term, without a greater convergence of economic policies and without political union.  As early as 1972 the Werner Plan called for a political union as a guarantee of the durability of a European monetary union.

It is the first time in history that so many sovereign countries have accepted the voluntary abandonment of the very symbol of their sovereignty and adopted a common form of money.  For Germans that meant the loss of the symbol of their economic success (the DEM) and for Greeks the loss of their drachma (GRD) with its 4000-year-old history.

"There may well be states without their own currency, but no durable currency without a state."
Mark Eyskens, government minister, Belgium.

For an historical summary of the history of  European monetary construction, see : www.europarl.eu.int/factsheets/5_1_0_en.htm

Show all/Hide all

1.2.2.3.1. What was the first step toward the implementation of the EMU?

First of all, the Genscher-Colombo Plan* and the report of the ad hoc committee of 30 June 1985, ended with a decision by the EC in Milan to call an "intergovernmental conference" for the revision of the Treaty of Rome.  The text of the agreement, dated 17 December 1985, and known by the name of the "Single Act", was approved by the European Council in Luxembourg in December 1985, and signed by the member states in February 1986, then ratified, coming into force on 1 July 1987.

1.2.2.3.2. What were the monetary objectives of the Single Act?

The principal objective of the Single Act was the establishment of a large internal European market, before 31 December 1992.  It referred to monetary problems and particularly to the EMS and the ECU as a basis for future solutions.  The result was the addition of a chapter (Article 102. A) to the Treaty of Rome, with the title "Cooperation in the field of economic and monetary policy".

1.2.2.3.3. What was the role of the Monetary Committee?

The impulse given to the technical preparation of the single currency and the progress achieved for the resolution of questions regarding the organisations which would manage the euro, particularly the European System of Central Banks (ESCB) and the ECB, owed much to the work of the Monetary Committee.  The Committee, was established as a consultative body by the European Union Treaty  (Article 109.C) and consisted of two representatives of each member state of the EC.  It brought together representatives of the European central banks, finance ministers, and the Commission.  It made preparations for meetings of the Ministerial Economic and Finance Council (Ecofin).  It was recognised that, under the direction of Sir Nigel Wicks*, the technical competence of Committee members and especially their ability to look beyond their national interests, played a decisive role in achieving European monetary union.

Sir Nigel Wicks

In January 1999, the Committee changed its name.  It is now called the Economic and Finance Committee (EFC) - or alternatively, the Eurogroup.

1.2.2.3.4. From an historical point of view, what are the principal characteristics of the European monetary construction?

They are :

• its duration : it required more than a century for the United States to establish a central bank.  The European Union, despite its cultural and linguistic diversity completed the same journey in fifty years;

• its pragmatism - which preceded political union;

• its consistency : the journey from the European Unit of Account Unit (EUA) to the euro, passing by the UA (1962) and the ECU-basket (1979) was at each stage achieved at a rate of 1 to 1.  In the moments of grave monetary crisis (1992-1993) the definition of the ECU was never put in question.  It should also be noted that the concept of stability developed first of all for the EUA (equal to the US dollar, the international reference currency) followed by a basket currency, is a significant innovation with reduced risks of exchange rated variation for importing and exporting companies.  This consistency explains why the value of the euro fluctuated for a long time at parity around the USD.

1.2.2.3.5. In comparison with past attempts at monetary union, what is the originality of EMU?

In the past, monetary agreements have either :

• been preceded by a political agreement opening the way of monetary union, the creation of a central bank, the issue of a common currency (other exception the German Münzverein*);
• been concluded to the advantage of a currency of one country, which then becomes the currency of the partner countries;
• been signed in order to assure the reciprocal circulation of money in each of the countries.

The originality of the EMU rests on the fact that the ECU first, the euro later, were created by sovereign countries in terms of monetary policies with their own central bank which, amongst other actions, issued their proper currency.

The EMU is also unique in terms of the autonomy it leaves each country to define its own economic and fiscal policies, something which permits them to offer securities under different conditions.  The big question is whether EMU will survive this oddity in the long term, without a greater convergence of economic policies and without political union.  As early as 1972 the Werner Plan called for a political union as a guarantee of the durability of a European monetary union.

It is the first time in history that so many sovereign countries have accepted the voluntary abandonment of the very symbol of their sovereignty and adopted a common form of money.  For Germans that meant the loss of the symbol of their economic success (the DEM) and for Greeks the loss of their drachma (GRD) with its 4000-year-old history.

"There may well be states without their own currency, but no durable currency without a state."
Mark Eyskens, government minister, Belgium.

For an historical summary of the history of  European monetary construction, see : www.europarl.eu.int/factsheets/5_1_0_en.htm