Economic and monetary union

This chapter introduces economic and monetary union (EMU). It describes the key components of EMU and what happens when countries join. EMU was the result of decades of collaboration and learning, which have been subdivided here into three periods: 1969–91, from the agreement to creation to its inclusion in the Treaty on European Union (TEU); 1992–2002, from having the plans for EMU to the irrevocable fixing of exchange rates; and 2002 onwards, when EMU had been established, and euro banknotes and coins were circulating in member states. Next, the chapter reviews various theoretical explanations, both economic and political, accounting for why EMU was created and looks at some criticisms of EMU. Finally, the chapter discusses how EMU has fared under the global financial crisis, the sovereign debt crisis and the Covid-19 pandemic. These crises brought to the fore various imperfections in the design of EMU and provided opportunities for further development. This section discusses what changes have been made since 2009 to address those flaws and at what may be yet to come.