An economic and monetary union (EMU) is a type of

trade bloc A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where barriers to trade (tariffs and others) are reduced or eliminated among the participating states. Trade blocs can be stand-alo ...

that features a combination of a common market,

customs union A customs union is generally defined as a type of trade bloc which is composed of a free trade area with a common external tariff.GATTArticle 24 s. 8 (a) Customs unions are established through trade pacts where the participant countries set u ...

, and

monetary union A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more states sharing the same currency. These states may not necessarily have any further integration (such as an economic and monetary union ...

. Established via a trade pact, an EMU constitutes the sixth of seven stages in the process of

economic integration Economic integration is the unification of economic policies between different states, through the partial or full abolition of tariff and Non-tariff barriers to trade, non-tariff restrictions on trade. The trade-stimulation effects intended by ...

. An EMU agreement usually combines a customs union with a common market. A typical EMU establishes free trade and a common external

tariff A tariff or import tax is a duty (tax), duty imposed by a national Government, government, customs territory, or supranational union on imports of goods and is paid by the importer. Exceptionally, an export tax may be levied on exports of goods ...

throughout its jurisdiction. It is also designed to protect freedom in the movement of goods, services, and people. This arrangement is distinct from a

(e.g., the

Latin Monetary Union The Monetary Convention of 23 December 1865 was a unified system of coinage that provided a degree of monetary integration among several European countries, initially Belgium, France, Italy and Switzerland, at a time when the circulation of bank ...

), which does not usually involve a common market. As with the economic and monetary union established among the 27 member states of the

European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...

(EU), an EMU may affect different parts of its jurisdiction in different ways. Some areas are subject to separate customs regulations from other areas subject to the EMU. These various arrangements may be established in a formal agreement, or they may exist on a '' de facto'' basis. For example, not all EU member states use the

Euro The euro (currency symbol, symbol: euro sign, €; ISO 4217, currency code: EUR) is the official currency of 20 of the Member state of the European Union, member states of the European Union. This group of states is officially known as the ...

established by its currency union, and not all EU member states are part of the

Schengen Area The Schengen Area ( , ) encompasses European countries that have officially abolished border controls at their common borders. As an element within the wider area of freedom, security and justice (AFSJ) policy of the European Union (EU), it ...

. Some EU members participate in both unions, and some in neither.

Territories of the United States Territories of the United States are sub-national administrative divisions and dependent territory, dependent territories overseen by the federal government of the United States. The American territories differ from the U.S. states and Indi ...

Australian External Territories The states and territories are the national subdivisions and second level of government of Australia. The states are partially sovereign, administrative divisions that are self-governing polities, having ceded some sovereign rights to the fede ...

and

New Zealand New Zealand () is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and List of islands of New Zealand, over 600 smaller islands. It is the List of isla ...

territories each share a currency and, for the most part, the market of their respective mainland states. However, they are generally not part of the same customs territories.

History

Several countries initially attempted to form an EMU at the Hague Summit in 1969. Afterward, a "draft plan" was announced. During this time, the main member presiding over this decision was Pierre Werner,

Prime Minister of Luxembourg The prime minister of Luxembourg (; ; ) is the head of government of Luxembourg. The prime minister leads the executive branch, chairs the Cabinet and appoints its ministers. Since 1989, the title of ''Prime Minister'' has been an official one, ...

. The decision to form the

Economic and Monetary Union of the European Union The economic and monetary union (EMU) of the European Union is a group of policies aimed at converging the economies of member states of the European Union at three stages. There are three stages of the EMU, each of which consists of progressi ...

(EMU) was accepted in which later became part of the

Maastricht Treaty The Treaty on European Union, commonly known as the Maastricht Treaty, is the foundation treaty of the European Union (EU). Concluded in 1992 between the then-twelve Member state of the European Union, member states of the European Communities, ...

(the Treaty on European Union).

Processes in the European EMU

The EMU involves four main activities. The first responsibility is to be in charge of implementing effective monetary policy for the euro area with price stability. There is a group of economists whose only role is studying how to improve the monetary policy while maintaining price stability. They conduct research, and their results are presented to the leaders of the EMU. Thereafter, the role of the leaders is to find a suitable way to implement the economists' work into their country's policies. Maintaining price stability is a long-term goal for all states in the EU, due to the effects it might have on the Euro as a currency. Secondly, the EMU must coordinate economic and fiscal policies in EU countries. They must find an equilibrium between the implementation of monetary and fiscal policies. They will advise countries to have greater coordination, even if that means having countries tightly coupled with looser monetary and tighter fiscal policy. Not coordinating the monetary market could result in risking an unpredictable situation. The EMU also deliberates on a mixed policy option, which has been shown to be beneficial in some empirical studies. Thirdly, the EMU ensures that the single market runs smoothly. The member countries respect the decisions made by the EMU and ensure that their actions will be in favor of a stable market. Finally, regulations of the EMU aid in supervising and monitoring financial institutions. There is an imperative need for all members of the EMU to act in unison. Therefore, the EMU has to have institutions supervising all the member states to protect the main aim of the EMU.

Roles of national governments

The economic roles of nations within the EMU are to: * control fiscal policy that concerns government budgets * control tax policies that determine how income is raised * control structural policies that determine pension systems, labor, and capital-market regulations

List of economic and monetary unions

(EMU) (1999/2002) with the

for the

Eurozone The euro area, commonly called the eurozone (EZ), is a Monetary union, currency union of 20 Member state of the European Union, member states of the European Union (EU) that have adopted the euro (Euro sign, €) as their primary currency ...

members * ''de facto'' the sovereign states in the OECS Eastern Caribbean Currency Union with the

East Caribbean dollar The Eastern Caribbean dollar (currency symbol, symbol: EC$; ISO 4217, code: XCD) is the currency of all seven full members and one associate member of the Organisation of Eastern Caribbean States (OECS). The successor to the British West Indies d ...

in the CSME (2006) * ''de facto'' Switzerland–Liechtenstein

Proposed

Previous EMUs

* Monetary union of the

Belgium–Luxembourg Economic Union The Belgium–Luxembourg Economic Union (, , , ), abbreviated to BLEU or UEBL, is an economic union between Belgium and Luxembourg, two countries in the Benelux, Benelux Union. BLEU was created by a treaty, signed on 25 July 1921, despite a 1919 ...

(1922–2002), superseded by the European EMU.

References

External links

African monetary union inches closer

United States of Southern Africa?

East Africa's first steps towards union

West Africa opts for currency union

Gulf States push for single currency

'Limited gains' from Gulf single currency

Do the Mercosur Countries Form an Optimum Currency Area?

Argentina plans monetary union

Economist – Antipodean currencies (Australia and New Zealand)

Three Perspectives on an Australasian Monetary Union

Reasons for the collapse of the Rouble Zone

In Search of the "Ruble Zone"

OECD Development Centre – the Rand Zone

A single African currency in our time?

{{DEFAULTSORT:Economic And Monetary Union * Customs unions Economic integration International macroeconomics Proposed currencies *