European Monetary Union and a Single Currency

In recent weeks there has been increasing speculation that the movement towards a single currency in the European Monetary Union (EMU) will be delayed or even abandoned (Kamm and Steinmetz, 1997). The purpose of this analysis will be to first describe the economic steps which have already been initiated, both individually and collectively. By the member-states of the European Union to create a common currency. The discussion will then detail the economic and political events of the past few months which have cast an increasing cloud over the likelihood of a Euro-currency in the near future. The presentation will conclude with some speculations on the probabilities for a common currency in the longer term as well as summarize the inherent difficulties of economic management involved in such a process.

The European Union (EU), which includes within its framework the European Community (EC) is a supernational organization which in some cases exercises exclusive authority to adopt legislation and represent its membership in the international arena, and in other cases shares competence with the authorities of its member states. These states are: Austria, Finland, Sweden, Belgium, France, Denmark, Germany, Greece, Ireland, Italy, Luxembourg, Portugal, Spain, the Netherlands, and the United Kingdom. Its legal capacity is most highly developed in economic areas such as trade, antitrust policy, agriculture, transport, nuclear energy, and

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s Tietmeyer eventually agreed that the gold could be revalued in 1997 but the German government accepted the Bundesbank position that the transfer of the proceeds to Bonn from the resulting capital gain would only take place in 1998, in line with the Bundesbank's normal accounting practices. This agreement means that the German government will no longer be able to count the proceeds of a gold revaluation towards meeting, in 1997, the criteria for economic and monetary union laid down in the 1992 Maastricht Treaty. Thus the government will supposedly have to resort to other measures to reduce its deficits if it is to meet the criteria (Fisher, 1997). The primary motivating factor behind both of these events was the movement towards a single European currency. Until these recent occurrences Mr. Chirac and Mr. Kohl have told their countries that the Euro will provide something for everybody. The Euro, they said, would be as solid as the German mark, vanquishing inflation and instability across Europe. But they both also promised that the Euro would bring unprecedented new growth by eliminating the barriers created by the Continent's current patchwork of currencies. Yet the recent election outcome in France and the German finan

Category: Economics - E