The Economic and Monetary Union (EMU) Name:Mohammed AlQahtani FINA 3313 MONEY & BANKING The Economic and Monetary Union (EMU) Name:Mohammed AlQahtani ID:200900210

Outline Background EMU Means Economic governance under EMU Introduction Background EMU Means Economic governance under EMU Economic Integration Economic Policy European Stability Mechanism (ESM)  Balance-of-Payments (BOP) Fiscal and Economic Measures

Introduction Economic and Monetary Union (EMU) represents a major step in the integration of EU economies. It involves the coordination of economic and fiscal policies, a common monetary policy, and a common currency, the euro. Whilst all 27 EU Member States take part in the economic union, some countries have taken integration further and adopted the euro.

Background The decision to form an Economic and Monetary Union was taken by the European Council in the Dutch city of Maastricht in December 1991, and was later enshrined in the Treaty on European Union (the Maastricht Treaty). Economic and Monetary Union takes the EU one step further in its process of economic integration, which started in 1957 when it was founded.

EMU Means Coordination of economic policy-making between Member States. Coordination of fiscal policies, notably through limits on government debt and deficit. An independent monetary policy run by the European Central Bank (ECB).

Economic governance under EMU The European Council The Council of the EU (the 'Council') The 'Eurogroup' The Member States The European Commission The European Central Bank (ECB) The European Parliament

Economic Integration Generally, economic and monetary union is an advanced step in the process of economic integration. The degrees of economic integration can be divided into six steps:

Economic and monetary union Complete economic integration Preferential trading area Free trade area Customs union Single market Economic and monetary union Complete economic integration When the European Union was founded in 1958 as the European Economic Community, the aim was to build a customs union and a common market for agriculture.

Economic Policy Economic policy is geared towards steady growth and more jobs in the EU. While aiming to stabilize the economy in the short term and increase potential growth in the medium term, it also addresses different longer- term challenges, such as population ageing and globalization.

Economic policies are suggested and implemented at both the national and European level. Indeed, economic policy is primarily a national responsibility, even if the Treaty declares that it should be regarded "as a matter of common concern" and coordinated within the Council.

A group of Member States has integrated their economies even further by adopting the single currency, which is now used by more than half the EU's citizens. The coordination of economic policies is done by monitoring the economic developments in each Member State and the EU on the basis of various reports by DG ECFIN on behalf of the Commission.

European Stability Mechanism (ESM) Its main features build on the EFSF. The ESM will be the primary support mechanism to euro area Member States and complements the new framework for reinforced economic surveillance in the EU. This new framework, which focuses on prevention and will substantially reduce the probability of a crisis emerging in the future.

Balance-of-Payments (BOP) Under BoP, the EU can provide mutual assistance to non-euro area Member States when a Member State is in difficulties or is seriously threatened with difficulties as regards its balance of payments. BoP assistance is designed to ease a country's external financing constraints. This can take the form of medium-term financial assistance.

Fiscal and Economic Measures The financial support is accompanied by fiscal and economic measures. For this purpose, the EU and its Member States have taken a series of important decisions that will strengthen economic and budgetary coordination in the EU as a whole and in the euro area in particular.

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