The EU and

ECONOMIC AND
MONETARY UNION
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n15 years of euro banknotes and coins

Economic and monetary union represents a
major step in the integration of EU economies.
Launched in 1992, the union involves the
coordination of economic and fiscal policies,
a common monetary policy, and a common
currency, the euro. Whilst all 28 EU Member
States take part in the economic union, some
countries have taken integration further and http://europa.eu/!PM88Qf
adopted the euro. Together, these countries
make up the euro area. The single currency
presents undeniable advantages: it lowers the Within economic and monetary union,
costs of financial transactions, makes travel a single monetary policy is set by the European
easier and strengthens the role of the EU at Central Bank and is complemented by
international level. harmonised fiscal and coordinated economic
policies. Within economic and monetary union,
there is no single institution responsible for
economic policy. Instead, the responsibility
is divided between Member States and various
EU institutions.

June 2017
 What is Economic and
Monetary Union?
Economic and monetary union takes the EU one
step further in its process of economic integration,
which started in 1957. Economic integration brings
the benefits of greater size, internal efficiency and
robustness to the EU economy as a whole and to the
economies of the individual Member States. This,
in turn, offers opportunities for economic stability,
higher growth and more employment — outcomes of
direct benefit to EU citizens.
Economic and monetary union is not an end in itself.
It is an instrument to further the objectives of the
European Union and improve the lives of citizens in
EU countries. As a consequence, economic policy-
making becomes a matter of common concern to
all EU countries. To ensure the smooth operation
of the EU economy as a whole, it is important that
all countries coordinate their economic and fiscal
policies with the common objective of stability and
growth.
nThe experience and benefits of the euro for Europe
The euro is the world’s
second currency:
more than 33.7 million
EU citizens in 19
countries use it as
their currency
The legitimacy of the euro
is paramount
As well as bringing the benefits of economic stability,
economic and monetary union and the single
currency also support a more effective single market
which benefits people and enterprises.
In practical terms, economic and monetary union
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;
▶▶ single rules and supervision of financial
institutions within the euro area;
▶▶ the single currency and the euro area.
The euro is a political
€ and economic project —
it protected us during
the financial crisis
The economic agenda
is based on reforms,
investment and
responsible public
finances, with social
fairness at its core
What the EU is doing
Following the outbreak of the economic and financial
crisis in 2007, the European Union took unprecedented
measures to improve the economic governance
framework of economic and monetary union. These
included the strengthening of the Stability and Growth
Pact (which helps enforce fiscal discipline and ensure
sound and sustainable public finances).
Navigating stormy seas — preventing future crises
http://europa.eu/!qr74HD
However, these emergency measures needed to be
consolidated and completed in the long term to avoid
a new crisis affecting economic and monetary union. A
two-stage roadmap to deepen economic and monetary
union was therefore agreed in July 2015. It will be
completed by 2025 at the latest.
In Stage 1, or ‘Deepening by doing’ (1 July 2015–30
June 2017), existing instruments and the current treaties
have been used to boost competitiveness and structural
convergence. It will achieve responsible fiscal policies
at national and euro-area level, complete the financial
union and enhance democratic accountability.
In Stage 2, or ‘Completing economic and monetary union’
(by 2025), more far-reaching actions will be launched to
make the convergence process more binding. This will be
done through a set of commonly agreed benchmarks for
convergence which would be of a legal nature, as well as
a euro-area treasury.
Within economic and monetary union there is no single
institution responsible for economic policy. Instead, the
responsibility is divided between Member States and
the EU institutions. The main actors in economic and
monetary union are:
▶▶ the European Council, which sets the main policy
orientations on the proposal of the Commission;
▶▶ the Council of the EU, which coordinates EU economic
policy-making and decides whether a Member State
may adopt the euro;
▶▶ the ‘Eurogroup’, which coordinates policies of common
interest for the euro-area Member States;
▶▶ the Member States, which set their national budgets
within agreed limits for deficit and debt, and determine
their own structural policies involving labour, pensions
and capital markets;
▶▶ the European Commission, which monitors
performance and compliance;
▶▶ the European Central Bank, which sets monetary policy,
with price stability as the primary objective and acts as
central supervisor of financial institutions in the euro
area;
▶▶ the European Parliament, which shares the job of
formulating legislation with the Council and subjects
economic governance to democratic scrutiny in
particular through the new economic dialogue.
© ccvision.de
The operations and management of economic and
monetary union are designed to support sustainable
economic growth and high employment through economic
and monetary policy. This involves four main economic
activities:
For this reason, under economic and monetary union,
monetary policy is closely coordinated, and within the euro
area it is centralised and independent.
Everyday training – managing our economies

▶▶ implementing an effective monetary policy for the euro

area with the objective of price stability;
▶▶ coordinating economic and fiscal policies in EU
countries;
▶▶ ensuring the single market runs smoothly;
▶▶ supervising and monitoring financial institutions.

Monetary policy involves influencing interest rates and http://europa.eu/!Kc87mj

exchange rates to benefit a country’s economy. This is
done by a central bank controlling the supply of money
in the economy. However, if each EU country operated
its own monetary policy, then the single market would
be much less effective; trade could be disrupted, and the
National governments control other economic policy areas.
benefits would be reduced.
These include fiscal policy that concerns government
budgets, tax policies that determine how income is raised,
structural policies that determine pension systems and
labour- and capital-market regulations.

nAn interactive version of this publication, containing links to online content is available in PDF and HTML formats:nn
nhttp://publications.europa.eu/webpub/com/factsheets/emu/en/

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