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Economic and currency union(EMU) was created to bring together the economies of states, currency regulation and harmonization of relations between countries. The EMU has actually become the basis of a single global Europe, where the interests of different countries are expressed by a single opinion. While various alliances and alliances (almost always military ones) have been known since antiquity, alliances of different countries with the unification of economies and currencies did not exist in history until the 20th century - which actually marked a new historical experiment on a planetary scale.
The history of the creation of the European Economic Monetary Union
The beginning of the unification of Europe took place almost immediately after the Second World War - after all, both the first and second World War began with intra-European conflicts. The first link of the future union was the creation of BENILUX, i.e. communities of the countries of Belgium, the Netherlands and Luxembourg in 1948. Almost 10 years later - in 1957 - the so-called European Community emerged from six countries and the abolition of customs duties (in fact, the abolition took place by 1968). At the same time, the well-known European association coal and steel. In 1969 European Commission made a proposal to solve the problem of the need to strengthen relations between the countries of Europe and the regulation of the economy and currency interaction: the heads of government approved the decision to create an economic and monetary union.
At the end of 1970, Pierre Werner (Minister of Finance of Luxembourg) announced an agreed project for the creation of an EMU in 3 stages (Werner Plan). The implementation of the plan failed due to a series of setbacks associated with the crisis of the gold standard and the massive increase in oil prices.
In the mid-1980s, the idea of creating an EMU was again discussed. This time the plan was developed by the Delors Committee, which included the heads of the Central Banks of 12 countries. The EMU was planned to be implemented in three stages and recommended the creation of a European system of central banks that determine monetary policy in Europe.
Stages of inclusion of the economic and monetary union of the EU:
1990-1993: The abolition of foreign exchange controls. Identified economic criteria for inflation and interest rates.
1994-1998: there is a strengthening of economic interaction between the participating countries through the creation of the European Monetary Institute. In order to create stability for the currency (euro) and currencies of countries that have not yet joined the euro area, an exchange rate mechanism has been created. The European Central Bank () appeared. The euro has been set.
1999 to present: The euro becomes the main currency in Europe. The leadership of the ECB is implementing a single monetary policy. Countries such as Greece, Slovenia, Cyprus, Malta, Slovakia, Estonia, Latvia, Lithuania are included in the final (third) stage of the EMU.
Structure of the EMU and criteria for membership in the Eurozone
Economic and monetary union consists of two components:
Economic Union. The basis is a unified competition policy and regulation of the economy and financial policy. The main task of the EC is to establish the harmony of the laws of the EU member states. Thanks to strict control over the size of the budget deficit and the balance of payments of the member countries, the economies are moving closer together.
currency union. The basis is the system of central banks, headed by the European Central Bank (ECB), pursuing a single monetary policy in the territories of the EU member states (the establishment of the euro).
Criteria for admission of an EU member state to the Eurozone:
inflation is not more than 1.5%;
absence of cases of devaluation of one's own currency in relation to the currency of another state for the last 2 calendar years;
the absence of a significant level of budget deficit;
rapprochement in the economy and financial policy, the absence of contradictions on the part of the legislation.
AT this moment The EMU includes 19 EU countries whose official currency is the euro, as well as 9 countries where the euro is not used. Members of the union may be territories with a special status and third countries for which the euro is the single official currency. According to the EU Treaty, the euro is presented as a tool to achieve the goals of the EMU. The increase in the degree of the international role of the euro is approved in the Lisbon Treaty.
♦ Eurozone members
♦private ERM II (with exchange rate mechanism)
♦ Denmark, member of ERM II with relaxations on the euro issue
♦ Great Britain, a former EU member with easing on the euro issue
♦ Other EU members
However, the recognition of the euro as a single official currency by third countries does not guarantee the "institutional" participation of these countries in the EMU. This kind of use of the euro in international financial transactions indicates the transformation of the euro into one of the main international regional currencies, and into the "leading tool" for expanding European integration. But outside the EU, the euro is only a means of payment and loses the “convergence” function established by the Treaty. The euro is becoming a tool for including such countries in the de facto integration processes.
Disadvantages in the operation of the EVS. Greek and Cypriot Crisis
The main principles of EMU operation are defined as follows:
The work of the EMU has never been cloudless, and especially in last years. The impetus for the elimination of shortcomings on the part of the union was the "Greek crisis", which began in 2010 and gained momentum subsequently. The reasons for the formation of a debt hole among the Greeks are usually called the dislike of the Greeks to pay taxes (which is sometimes even compared with national view sports), a bloated bureaucracy with splendid benefits, and the country's marked focus on tourism after joining the EU. As a result, by 2015 Greece's debt exceeded 300 billion euros (about 175% of GDP) and the schedule of its payments is scheduled until 2054 - on average, the country will have to pay about 7 billion euros annually.
As a result, the EMU came up with a proposal to impose sanctions against EU member states that are not aware of the correct observance of the norms of budgetary regulation. A commission was organized, the composition of which included European leaders (ministers of finance) - and as a result, a decision was made on early financial audits (audits) of annual budgets until they were adopted at the official level. Financial control in the form of audits was supposed to help prevent unauthorized waste. Leaders European countries called for the implementation of complete audits in order to keep countries from possible "debt pits".
However, after the story with Greece, the number of problems did not decrease. Moreover, they took on a growing character and in 2013 the peak of the “Cyprus crisis” was ripe.
As a result of the Cyprus crisis, restrictions were placed on the movement of financial assets. Private clients of Cypriot banks could withdraw no more than 300 euros per day and take abroad no more than 3,000 euros, while the owners of deposits from 100,000 euros could return only a part of the invested funds. The prerequisites for the formation of a financial bubble was the deterioration of economic indicators in the Greek part of the island. Interest on deposits in Cyprus (4.45%) was many times higher than interest rates, for example, in Germany (1.5%). Most of the deposits "passed over" for 100,000 euros. Such a high percentage was paid by attracting new investors (mainly from the Russian Federation). That is, the contours of the financial pyramid were visible. The country gradually began to resort to the help of international loans.
On March 16, 2013, a one-time tax on bank deposits in the country was introduced as a leading condition for receiving assistance. The share of capital held in the banking sector of Cyprus amounted to 835% of the Cypriot GDP. 1/3 of the deposits belonged to the citizens of the Russian Federation. Banks suspended their activities: no money transfer operations were carried out, no cash was issued. ATMs were empty - the financial crisis in Cyprus was at its peak.
The most famous and largest player in the banking sector, the Bank of Cyprus, was recapitalized, and the Cyprus Popular Bank (trademark of Laiki Bank) was liquidated. Official data on the losses of depositors in different sources are somewhat different. The losses of depositors who did not insure their deposits amounted to about 40%, while in the Cyprus Popular Bank the losses reached 80%. Holders of Bank of Cyprus deposits received blocks of shares of the bank, part of the deposits was "unblocked".
Cyprus was transferred 10 billion euros from the European Union and the IMF in exchange for the liquidation of the Cyprus Popular Bank, write-offs of accounts payable in the private sector and withdrawals of deposits in excess of 100,000 euros. For this reason, I do not recommend long-term investments through Cypriot subsidiaries of Russian companies and other companies with Cypriot regulation - in my opinion, either American brokers with up to $ 500,000 or Central European brokers such as Saxobank are preferable.
Thus, the process of exerting influence of the EMU on the member states of the European Union continues to this day. It is necessary to achieve the criteria for convergence and harmonization of the economies and financial policies of countries for entry into the Eurozone. Time and practice can reveal new shortcomings of the EMU, the main task for European leaders is the timely elimination of differences in the legislation of the monetary institutions of the EU member states and the normalization of the general economic atmosphere. The last significant news was the decision of the UK to leave the European Union, which collapsed the pound.
West African Economic and Monetary Union
In addition to the European EMU, there is the West African Economic and Monetary Union (WAMOA). The members of this Union are: Benin, Burkina Faso, Côte d'Ivoire, Mali, Niger, Senegal, Togo, Guinea-Bissau. UEMOA focuses on the actions of the European Union and also involves the elimination of differences in the laws of the participating countries, the integration of the economy and financial policy. The main task is strict financial control over the execution of decisions by the participating states.
The goals of the creation of the UEMOA are:
the unification of the market for the free movement of goods and capital;
unified rules of competitiveness;
provision of state support to producers of goods and services;
harmonization of the economy and financial policy of the participating countries;
establishment of connection (convergence) in the coordination of annual budget estimates with the monetary policy of the Union.
The basis of the formation of the budget of the UEMOA is deductions from customs duties for goods shipped from third countries (0.5% of the price), but the main part of the costs is financed from the EU budget through signed conventions.
In 2002, the US and SEMOA signed an agreement to develop trade relations and investment. The advantage of the agreement was to assist the development of the countries participating in the SEMOA through the entry of African goods into the American market. In addition, it was supposed to receive investments for the development of unused resources of countries (minerals, energy).
UEMOA has also entered into a number of agreements with Morocco, Egypt and Tunisia and has received fairly large countries as trading partners. However, the implementation of programs for the free movement of goods within the economic space of the union is still difficult. France remains the main partner of UEMOA. Cooperation agreements have been signed with the EU.
It is interesting! In Europe, commemorative coins of the series "10 years of economic and monetary union 1999-2009" with a face value of 2 euros were issued. The coins are made of cupronickel, nickel and bronze. In the center of the coin there is a human figure with an outstretched hand, which ends with the euro symbol. This coin is one of the favorites among numismatists and connoisseurs of history.
The EU Treaty provides for the creation of the European Monetary Union (EMU) and the introduction in 1999 of a single European currency - the euro. The European Monetary System was created in 1979 in accordance with agreements that ensured the functioning of a mechanism based on the parallel action of two interrelated factors: maintaining parity between currencies and economic convergence. The participating states were obliged to restrain exchange rate fluctuations within certain limits. Responsibility for maintaining certain limits of fluctuations and foreign exchange interventions was assigned to central banks.
The formation of the European Monetary Union took place in three stages.
The first phase began on July 1, 1990 and ended on December 31, 1993. This phase saw the liberalization of capital markets and enhanced coordination and cooperation within the Committee of Central Bank Governors; stability of prices and exchange rates has been achieved; the coordination of the economic policies of the member states has been strengthened.
At the second stage - from January 1, 1993 to the beginning of 1999 - the European Monetary Institute was created on the meringue of the Committee of Governors of Central Banks, designed to significantly strengthen the cooperation of the central banks of member countries in developing a common monetary policy; strengthen economic policy coordination, prepare the establishment of the European Central Bank. The main requirements included:
compliance of national legislation with the EU Treaty;
the inflation rate should not exceed the indicators of the three most stable EU states by more than 1.5%;
public debt can be no more than 60% of the gross domestic product;
the state budget deficit cannot exceed 3% of GDP; interest rates on bank loans may be as little as 2 percentage points higher than those of the three most stable countries;
Candidates for joining the EMU undertake to maintain the stability of national monetary units and are deprived of the opportunity for two years on their own initiative to carry out their devaluation.
As a result, by mid-1998, 11 countries out of 15 EU members had fulfilled the requirements of the EU Treaty, which made it possible for them to become members of the European Monetary Union (EMU) and introduce a single European currency - the euro. 4 countries - Great Britain, Denmark, Sweden and Greece are not included in the EMU. At the same time, Great Britain and Denmark themselves chose not to be part of the EMU; Sweden - must bring its legislation into line with the EU Treaty and fulfill the condition of maintaining the stability of the national currency; Greece - does not meet several basic criteria: Inflation rate, budget deficit and interest rates. In 1998, after determining the membership of the EMU, the European System of Central Banks (ESCB) was established, headed by the European Central Bank (ECB).
The third stage of the formation of the EMU began on January 1, 1999. At this stage, the ECB is authorized to be responsible for the implementation of the single currency and credit policy by the countries that are members of the monetary union. The euro receives the official status of the European currency, and the currency unit - the ECU, based on the "basket of currencies", ceases to exist. At the same time, firmly fixed exchange rates of the EMU members against the euro and mutual exchange rates of these currencies were established. In 1999 -2001 The euro was used mainly as a non-cash currency in settlements between the central banks that are members of the ESCB, as well as in the interbank market. Since July 1, 2002, the euro has become the only legal tender and settlement medium.
Thus, the introduction of the single European currency euro completed the process of creating the EMU and attaching the currencies of the EU member states to each other. The EMU and the euro make it possible to maximize the benefits of the EU single internal market by reducing production and distribution costs (reducing the cost of foreign exchange and insurance against foreign exchange risks; ensuring greater transparency of prices, which facilitates their comparison and harmonization in member countries; increased competition between businesses and banks).
In 1988, the President of the European Commission, J. Delors, developed a Plan for the formation of an economic and monetary union of the EU on a phased basis, which, with some changes, was included in the Maastricht Treaty on European Union. Its main goal is to promote economic and social progress and high levels of employment through the establishment of the EMU, which has a single currency. The economic and monetary union was created taking into account two principles: parallelism, i.e. the parallel formation of an economic and monetary union, and subsidiarity, i.e. the issue is resolved at the level where it arose (local, regional, state or supranational).
At the first stage (1990-1993) the movement of mutual capitals was liberalized; formed a single domestic market; the European Monetary Institute was formed as a coordinating body in the implementation of a tight monetary policy and tight budgetary discipline.
Within the framework of the second stage (1994-1998), the actions of the countries were aimed at consolidating the main macroeconomic indicators of development; the European Central Bank was formed on the basis of the EMI; the countries-candidates for the transition to the third final stage of the formation of the EMU were determined, taking into account the principles of convergence.
The third stage began on January 1, 1999. the introduction of the single currency euro (originally, the name ecu was used in the Maastricht Treaty, but it was decided to give the single European currency an impersonal name) in non-cash payments. The day before (December 31, 1998), the exchange rates of the national currencies of the countries were fixed between themselves and in relation to the single currency. The ECUs were recalculated into euros at a ratio of 1:1, foreign exchange trading in euros began to take place; double marking of prices, financial documents in national currency and in euro is established; began to issue state securities In Euro; The minting of coins and the printing of euro banknotes began. In 2002 the euro was issued into cash, all settlements within the EU and all transactions, including foreign trade and other contracts, were converted into euro; during the first two months, national currencies and the single currency were in circulation, national currencies were gradually withdrawn from circulation, and from March 1, 2002. the euro became the only payment and settlement instrument in the euro area, which was evidence of the completion of the formation of the economic and monetary union of the EU - the next important stage in the evolution of Western European integration.
The Economic and Monetary Union has an institutional structure called the European System of Central Banks (ESCB). It includes two levels. Top level European Central Bank (ECB). It issues a single currency, a unified monetary and monetary policy, manages the official foreign exchange reserves of the euro zone, and determines interest rates on loans from the euro zone. Planned for 2010 form the Single Euro Payments Area (SEPA). The main goal is the implementation of cross-border payments in electronic form, which will reduce their costs and terms of execution compared to domestic payments. The lower level of the ESCB is formed by national central banks, which have the right to dispose of the remaining official foreign exchange reserves, represent the country in international economic organizations, i.e. partly lost their independence.
Initially, the euro zone included 11 countries - Germany, France, Italy, Belgium, the Netherlands, Luxembourg, Ireland, Spain, Portugal, Austria and Finland. Three countries - Great Britain, Denmark and Sweden did not enter for political reasons, using the system of temporary exceptions of the Maastricht Treaty (giving the right to independently determine the date of joining the euro zone, but taking into account the developed convergence criteria). For economic reasons (non-compliance with convergence criteria), Greece has joined the euro area since 2001. Since 2007, Slovenia has been participating.
The Maastricht Treaty developed convergence criteria designed to assess the readiness of national economies to join the single currency area. These include: (1) the inflation rate must not exceed 1.5% points of the average of the three countries showing the lowest inflation rate; (2) the state budget deficit cannot exceed 3% of the country's GDP; (3) public domestic debt should not exceed 60% of GDP; (4) the level of interest rates on long-term loans is not higher than 2% points of the average of the three countries with the lowest inflation rate; (5) the national currency has been participating in the European Monetary System for at least two years and adheres to the established limits on exchange rate fluctuations (currently +-15%).
The listed criteria remain important for the member countries of the euro zone, as it is necessary to maintain the stability of the single currency and the stability of the economic development of countries. In 1996 approved the Amsterdam Pact for Stability and Growth. Its goal is to maintain the budget deficit at a level of no more than 3% of the country's GDP and the ratio of domestic public debt to GDP at a level not exceeding 60%. A country whose economy does not comply with these criteria is obliged to develop a program to get out of the current economic situation, in case it fails implementation to the country apply penalties.
In 2005, changes were made to the Stability and Economic Growth Pact. Five directions of its reform have been identified.
The single currency euro was introduced on January 1, 1999. first in non-cash payments, and from January 1, 2002 in cash. There are 7 types of banknotes in circulation in denominations of 500, 200, 100, 50, 20, 5 Euros and 8 denominations of coins in denominations of 1.2 Euros and 50, 20, 10, 5, 2.1 euro cents. Since January 1999 the euro exchange rate against the US dollar was set at 1 euro: 1.16 dollars. It was maintained., but then began to decline. The following reasons had an effect: the euro exchange rate, which was initially overvalued against the US dollar; more dynamic and stable development of the American economy; recession in the economy of Germany (due to the reunification of the two Germanys) and Italy; corruption scandal in the EC; the policy of the ECB, whose leadership could stabilize the dynamics of the euro exchange rate through foreign exchange interventions, but chose not to do so in order to promote the growth of the competitiveness of European goods in foreign markets due to the cheaper euro. The situation changed in the late autumn of 2001, when the euro exchange rate began to rise against the dollar due to changes in the economic situation in the US and the EU, the tragic events in September 2001. in the USA. The euro exchange rate maintains an upward trend against the dollar even now.
The introduction of the single currency euro has great value both for the EU as a whole, companies and the population of the Union, and for the global economy. For the Union, the single currency stimulates a stable and dynamic economic development, employment growth due to tight budgetary discipline, curbing inflation, lowering interest rates; reduces the volume working capital by reducing the amount of overhead costs, reducing the time for transferring financial resources (including thanks to the TARGET settlement system, which allows real-time payments for large payment transactions and ensures higher efficiency of financial markets), a single monetary and monetary policy; no need to exchange currencies when visiting other member countries for the population, which means that trips within the Union have become cheaper. The euro has taken a worthy place in the official foreign exchange reserves of the countries, has somewhat supplanted the US dollar as an instrument in international economic settlements, and contributes to the formation of a bipolar monetary system of the world.
Thus, the evolution of integration processes in the European Union (from a customs union to an economic and monetary union and the ongoing formation of a single union, expansion from 6 to 27 members) serves as a unique example of economic integration in world practice. At the same time, the consequences of the fifth and sixth stages of EU enlargement for the evolution and dynamics of European integration are far from clear.
Main risks and problems of EMU
Countries that have adopted the euro should form a homogeneous economic space, although they differ markedly from each other in terms of their economic characteristics. The convergence criteria introduced by the Maastricht Treaty assume the harmonization of only some macroeconomic indicators: inflation rates, the state budget deficit, the size of the public debt and interest rates on 10-year government bonds. However, employment, industrial prices, taxes, and many other economic processes remain largely in the hands of national governments.
Therefore, there are fears that so-called asymmetric shocks may occur in the euro area. In other words, the introduction of a single monetary and common economic policy will be in conflict with the preservation of national specifics.
sharp criticism in recent times subject to the Maastricht criterion, which prohibits EU countries from having a state budget deficit of more than 3% of GDP. Many believe that too tight fiscal discipline prevents EU countries from stimulating economic growth, and that the long stagnation in the economy of Western Europe is associated with the introduction of the euro. In the long term, the greatest difficulties may arise in countries with "catch-up economies": Spain, Greece, Portugal, as well as all new EU members. In order to catch up with the most developed EU states, they should increase public investment in the economy and in the social sphere (including infrastructure, science and education). However, it is extremely difficult to carry out a large-scale modernization of production in conditions of strict budgetary discipline.
It is still not clear how synchronous the economic cycle will be in different countries euro area. Some experts believe that the existence of a monetary union will contribute to the formation of a single trajectory of the economic cycle of all participating countries. Others believe that local specifics will not allow eliminating asynchrony. First of all, this applies to potential EMU members: Great Britain and CEE countries. The latter have higher growth rates than Western European countries, and the ups and downs of the economic environment are much steeper. If, in Western Europe, there will be a manufacturing boom, and, for example, in Slovenia, a recession will begin, then the European Central Bank will set the refinancing rate at the maximum level, based on the interests of the majority. In such a case, a country that is “out of step” will find itself under the influence of a monetary policy that is contrary to its current needs.
The CEE countries expect to receive significant benefits from joining the euro area: to strengthen their authority in the EU and in the world, to solve the problem of stabilizing exchange rates in many respects, to reduce the costs of foreign exchange operations, and to start paying for imported goods with the national currency. However, their membership in the EMU will be associated with many difficulties arising from the difference in levels of development and economic structure between the western and eastern flanks of the enlarged EU. It is the beginners who will have to adapt to the actions of the "veterans", and not vice versa.
In the coming years, the European Union will consist of two economically (and hence politically) unequal parts: the eurozone and its outsiders. If the new EU countries enter the monetary union economically immature, this will seriously hamper the modernization of their economies. If the expansion of the euro area drags on, there will be a risk of the EU splitting into the first, second, and, possibly, third tier (which will include Bulgaria, Romania, Croatia).
With the transition to a single currency, the European Union was able to act as a single entity in resolving issues related to the development and reform of the international monetary system. The ECB participates in the activities of the IMF, and the euro area has a permanent representation at the meetings of finance ministers " big seven". Effective January 1, 1999, the DM and French franc quotas in the SDR basket (which also includes the US dollar, Japanese yen and pound sterling) were merged into the euro quota. Since January 1, 2006, in the basket of SDRs, the dollar accounts for 44%, the euro - 34%, the Japanese yen and the pound sterling - 11% each. Gradually, the European Union is forming own view on the problems of regulating international monetary and credit relations and ensuring monetary and financial stability. Strengthening the European elements in the policy of international financial institutions requires time and significant efforts on the part of the EU, including skillful interaction with the United States both in matters of common interest and in cases where the parties are competitors.
The European Monetary Union, at the moment, unites 19 EU states that are part of the Eurozone. The rest of the EU states will join it when they meet the criteria for entry. The euro was introduced to the world as a settlement currency on January 1, 1999. And since January 1, 2002, it entered into cash circulation throughout the eurozone, this is how the part of the European Union began to be called, where the euro became a regional currency.
Initially, the purpose of the association was: the creation of a common market throughout the territory of these states, regional integration, common legislation and policies in the field of trade, a common currency and a common European Central Bank. All this was undertaken, in the end, to increase the gross domestic product, increase the purchasing power of the population, and hence improve life in the EU.
Eurozone advantages
The main advantage of the Eurozone is the free movement of people, goods, capital and services. The population of the EU is 500 million people. The turnover of the euro, of course, is huge within the country, and now also beyond its borders. This allows you to survive global crises and recover faster after them. Easier to ensure price stability and low interest rate. All this is facilitated by the unification of all national central banks into a single European Central Bank.
Why do we need a banking union
The result of all the measures taken to unite the European Monetary Union was the creation of a banking union, which serves to strengthen the eurozone economy. As a result of monitoring the activities of banks, deposits are guaranteed - taxpayers are confident in their cash savings. There is the same attitude towards all problem banks. 130 large EU banks are under control.
What has changed in the life of the population of the eurozone
As a result of the abolition of passport control, all residents of the Eurozone can work, study, retire in any of its territories, in any state, which reduces the number of unemployed. Businesses have canceled all duties when crossing borders. Simplified tourism and trade. The exchange rate in the EU is stable. Not all EU countries have entered the monetary union, that is, they have switched to euro settlements. Is this a disadvantage. Perhaps, by discussing and changing the rules for joining the eurozone, a more complete consideration of the wishes and possibilities of each country will be achieved. After all, everything flows, everything changes. At the moment, the policy of monetary union brings benefits to the entire European community.
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