An economic and monetary union (EMU) is a type of trade bloc featuring some combination of a common market, customs union and a monetary union.

Established via a trade pact, an EMU constitutes the sixth of seven stages in the process of economic integration. An EMU agreement usually combines a customs union with a common market; a typical EMU establishes free trade and a common external tariff throughout its jurisdiction, and enforces the freedom of movement of goods, services and people. This arrangement is distinct from a monetary union (e.g. the Latin Monetary Union), which usually does not involve a common market.

As with the economic and monetary union established among the 28 member states of the European Union, an EMU may affect different parts of its jurisdiction in different ways, with some areas subject to separate customs regulations from the majority of the areas subject to the EMU. These varying arrangements may be established in the formal agreement, or they may simply exist on a de facto basis. For example, not all EU member states use the Euro established by its currency union and not all EU member states are part of the Schengen Area. Some nations participate in both unions, and some participate in neither of them.

Territories of the United States, Australian External Territories and Realm of New Zealand territories share a currency and, for the most part, the market of their respective mainland states, but are generally not part of the same customs territories.

History and the First StepEdit

The first discussion about the formation of a union occurred in 1969, at the summit at the Hague. As a result of these talks, a draft plan was announced by the heads of various member states, as well as the main member Pierre Werner, Prime Minister of Luxembourg.

The decision to form the EMU was accepted in December 1991, which later became part of the Maastricht Treaty (the Treaty on European Union).[1]

The Processes in the EMU and their Work[2]Edit

The EMU Involves Four Main ActivitiesEdit

1. 'Implementing an effective monetary policy for the euro area with the objective of price stability - there are a group of economists whose only role is studying how to improve the monetary policy in 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 EMU, due to the effects it might have on the Euro as a currency.

2. 'Coordinating economic and fiscal policies in EU countries - another role of the EMU is to 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 will also have to deliberate on the option of a mixed policy which in some empirical studies have shown that sometimes it can have more benefits than expected.[3]

3. 'Ensuring the single market runs smoothly - all member countries will respect the decisions made by the EMU and also ensuring that their actions will be in favor of a stable market[4]

4. '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.

The Role of the National GovernmentsEdit

  1. Control fiscal policy that concerns government budgets.
  2. Control tax policies that determine how income is raised.
  3. Control structural policies that determine pension systems, labor- and capital-market regulations.

List of Economic and Monetary UnionsEdit

ProposedEdit

Community Currency Region Target date Notes
Economic and Monetary Community of Central Africa (CEMAC) Central African CFA franc Africa Not yet functioning common market
West African Economic and Monetary Union (UEMOA) West African CFA franc Africa Not yet functioning common market
Gulf Cooperation Council (GCC) Khaleeji Middle East Possibly gold backed, but postponed due to the financial crisis of 2007–2008.
East African Community (EAC) East African shilling Africa 2015 To be used by the future East African Federation
Caribbean Single Market and Economy (as part of the CARICOM) Latin America
/Caribbean
2015 To supplement the OECS Eastern Caribbean Currency Union
Southern African Customs Union (SACU) South African Rand Africa 2015 de facto for the CMA member when the SADC economic union is established
Southern African Development Community (SADC) South African Rand
(interim proposal)
Africa 2016 To supplement or succeed the CMA and Southern Africa Customs Union
South Asian Association for Regional Cooperation South Asia 2016[citation needed]
Union of South American Nations (UNASUR) Latino[7] Latin America
/Caribbean
2019
Economic Community of Central African States (ECCAS) Africa To supplement the Economic and Monetary Community of Central Africa (CEMAC)
Economic Community of West African States (ECOWAS) Africa 2020 To succeed UEMOA and WAMZ
African Economic Community Africa 2028 See African Monetary Union
Union State of Russia and Belarus Russian ruble Europe
Arab League Arab Dinar Arab states Arab Dinar has been proposed ever since the creation of the Arab Monetary Fund, expected for serious plans of doing so, after the creation of the proposed Arab Union.
Eurasian Economic Union Altyn Eurasia 2025 Kazakhstani President Nursultan Nazarbayev had first proposed, in 2009, the creation of a common noncash currency called "yevraz" for the Eurasian Economic Community. It would have reportedly helped insulate the countries from the global economic crisis.[8] In 2012, the idea of the new joint currency found support from Vladimir Putin and Dmitry Medvedev and by 2014 proposals were drafted in Eurasian Commission documents for the establishment of a Eurasian Central Bank and a common currency to be called the altyn which is to be introduced by 2025.[9]

PreviousEdit

 
Stages of economic integration around the World (each country colored according to the most integrated form that it participates with):
  Economic and monetary union (CSME/EC$, EU/, Switzerland–Liechtenstein/CHF)
  Common market (EEA–Switzerland, ASEAN[dubious ])

See alsoEdit

ReferencesEdit

  1. ^ "What is the Economic and Monetary Union? (EMU)". European Commission - European Commission. Retrieved 2019-05-04.
  2. ^ "How the Economic and Monetary Union works". European Commission - European Commission. Retrieved 2019-05-04.
  3. ^ Blinder, Alan (September 1982). "Issues in the Coordination of Monetary and Fiscal Policy". Cambridge, MA. Cite journal requires |journal= (help)
  4. ^ pub/com/factsheets/emu/en/ "The EU and economic and monetary union" Check |url= value (help). publications.europa.eu. Retrieved 2019-05-04.
  5. ^ The states participating in both initiatives are Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines.
  6. ^ Single market through participation in the internal market of the European Union, customs union since 1924, informal currency union since 1920.
  7. ^ Proposed by Ecuador's President Rafael Correa on December 15, 2007
  8. ^ "Kazakhstan Suggests a New Currency - News". The Moscow Times. Retrieved 4 June 2015.
  9. ^ "Russia, Kazakhstan and Belarus to have new joint currency". Retrieved 8 July 2014.
  10. ^ Not currently on any political agenda, based mostly off conspiracy theories.

Further readingEdit

External linksEdit