EMU

EMU stands for European Monetary Union or in plain English 'the single European currency'. Most of Europe's leading economies have abandoned their national currencies in favour of one European currency.

Portugal, Spain, France, Ireland, Belgium, Luxembourg, the Netherlands, Germany, Austria, Italy and Finland took part in the first wave of EMU from January 1, 1999. They were joined on January 1, 2002 by Greece. Denmark rejected the single currency in a referendum while Sweden and Britain are sitting on the sidelines.

Slovenia qualified in 2006 and was admitted on 1 January 2007 bringing total Eurozone membership to its current level of over 315 million people and thirteen member states

On January 1, 1999, the European Central Bank ( ECB ) took over monetary policy. All stocks and government debt in countries participating in EMU ("Euroland" or the "Euro zone" as it is called) became denominated in Euros. Bank accounts, credit cards and prices were quoted in Euros and companies started accounting in Euros.

On January 1, 2002, Euro notes and coins were introduced. Across Euroland national currencies are no longer legal tender although banks in Europe will continue to accept and exchange them for Euros for several years.The planning for EMU has been under way for some time.

Monetary union was originally proposed as a long-term objective for the then European Economic Community at summit conference in The Hague, the Netherlands in December 1969. Over the next three decades, advocates argued that such a move would bring the nation states together economically and politically. The benefits are said to include higher living standards over time across Europe.

Critics of EMU claim the move to a single currency will mean a loss of sovereignty over monetary policy and argue that EMU is an experiment that could damage some economies if they are 'out of sync' with the others.

As an issue EMU was a major dividing factor in British politics in the 1990s and split the 1992-1997 Conservative government in two, effectively contributing to the landslide election victory of New Labour in 1997.

Towards the end of the 1990s, the official line being taken by the opposition Conservatives was not to countenance entry into EMU within the lifetime of two Parliaments.

New Labour government policy was to consider entry into EMU after the 2001 election but only to enter EMU after a referendum vote in favour of doing so. With Gordon Brown now Prime Minister Eurozone membership would appear to have fallen even further down the Government's list of priorities.

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Last Updated: June 2007 © Moneyextra.com

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