Eurosystem

The three stages of EMU

The launch of Economic and Monetary Union (EMU) involves following a previously designed roadmap, setting out the three stages of EMU.

Stage 1

Stage one began on 1 July 1990. Its main features were the removal of the internal restrictions on the free movement of goods, people, services and capital between the Member States of the European Union (EU) and endeavours to advance towards economic convergence through the multilateral monitoring of Member States' economic policies.

Progress was made revising the founding treaties of the European Economic Community (EEC) to adapt them to the new objectives. On 7 February 1992, the Treaty on European Union (TEU) was signed in Maastricht, coming into force on 1 November 1993 following a lengthy ratification process. The new treaty contained the Protocol on the Statutes of the European System of Central Banks (ESCB) and the European Central Bank (ECB) and the Protocol on the Statutes of the European Monetary Institute (EMI).

Stage 2

Stage two began with the establishment, on 1 January 1994, of the EMI , the precursor to the ECB. The technical preparations were carried out during this stage to introduce the single currency, the application of budgetary discipline and improvement in the convergence of the economic and monetary policies of the Member States of the EU.

In December 1996, a series of designs were presented for the banknotes which were to be put into circulation in 2002.

Additionally, the EMI presented the European Council with a report which laid the foundations for the creation of the new currency exchange mechanism which was adopted in June 1997 and which regulated the monetary and currency exchange relations between countries of the euro area and the other EU countries.

In June 1997, the European Council also approved the Stability and Growth Pact designed to guarantee budgetary discipline.

In May 1998, the EU Council decided on the countries that had fulfilled the conditions necessary to adopt the euro as their currency, namely: Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland. The Governments of the euro area appointed the Chairman, Vice-Chairman and the four members of the Executive Board of the ECB.

The ECB was created on 1 June 1998 and devoted the rest of the year to putting into practice the preparatory work carried out by the EMI.

Stage 3

Stage three began on 1 January 1999 with the irrevocable fixing of the exchange rates for the currencies of the 11 Member States which initially participated in the EMU and the adoption of the euro as the single currency. From that date on, the Governing Council of the ECB assumed responsibility for managing the single monetary policy of the euro area.

On 1 January 2001, Greece joined the euro area.

The changeover to the euro was completed on 1 January 2002 when euro banknotes and coins were put into circulation.