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-alon ...

that features a combination of a

common market The European Economic Community (EEC) was a regional organization created by the Treaty of Rome of 1957,Today the largely rewritten treaty continues in force as the ''Treaty on the functioning of the European Union'', as renamed by the Lisbo ...

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 up ...

, 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 A trade agreement (also known as trade pact) is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that help them trade with each other. The most common tr ...

, 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 b ...

. 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 is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and poli ...

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 Latin Monetary Union (LMU) was a 19th-century system that unified several European currencies into a single currency that could be used in all member states when most national currencies were still made out of gold and silver. It was establish ...

), 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 political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...

(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 ''De facto'' ( ; , "in fact") describes practices that exist in reality, whether or not they are officially recognized by laws or other formal norms. It is commonly used to refer to what happens in practice, in contrast with ''de jure'' ("by la ...

'' basis. For example, not all EU member states use the

Euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...

established by its

currency union A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more State (polity), states sharing the same currency. These states may not necessarily have any Economic integration#Stages, further integratio ...

, and not all EU member states are part of the

Schengen Area The Schengen Area ( , ) is an area comprising 27 European countries that have officially abolished all passport and all other types of border control at their mutual borders. Being an element within the wider area of freedom, security and j ...

. 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 overseen by the federal government of the United States. The various American territories differ from the U.S. states and Indian reservation, tribal reservations as ...

Australian External Territories The states and territories are federated administrative divisions in Australia, ruled by regional governments that constitute the second level of governance between the federal government and local governments. States are self-governing po ...

and

New Zealand New Zealand ( mi, Aotearoa ) is an island country in the southwestern Pacific Ocean. It consists of two main landmasses—the North Island () and the South Island ()—and over 700 smaller islands. It is the sixth-largest island count ...

territories each share a currency and, for the most part, the

market Market is a term used to describe concepts such as: *Market (economics), system in which parties engage in transactions according to supply and demand *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an ...

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 Pierre Werner (29 December 1913 – 24 June 2002) was a Luxembourgian politician in the Christian Social People's Party (CSV) who was the 18th Prime Minister from 1959 to 1974 and from 1979 to 1984. Training and early activities Pierre Werne ...

Prime Minister of Luxembourg german: Premierminister von Luxemburg , insignia = Lesser CoA luxembourg.svg , insigniasize = 100px , insigniacaption = Lesser coat of arms of Luxembourg , insigniaalt = , flag ...

. 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 progr ...

(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 states of the European Communities, it announced "a new stage in the ...

(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 eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU policies ...

members * ''de facto'' the OECS

Eastern Caribbean Currency Union The Eastern Caribbean Currency Union (ECCU) is a development of the Organization of Eastern Caribbean States. This organization is composed of Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia, and S ...

with the

East Caribbean dollar The Eastern Caribbean dollar (symbol: EC$; 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 dollar, it has existed sinc ...

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

Proposed

Previous EMUs

* Monetary union of the

Belgium–Luxembourg Economic Union The Belgium–Luxembourg Economic Union ( nl, Belgisch-Luxemburgse Economische Unie, french: Union économique belgo-luxembourgeoise, german: Belgisch-Luxemburgische Wirtschaftsunion, lb, Belsch-Lëtzebuerger Wirtschaftsunioun), abbreviated to B ...

(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 *