ABSTRACT

The progress along the road from free trade area to full union takes in the station of Economic and Monetary Union (EMU). The policy integration needed for a monetary union has mostly to do with stabilisation. In this chapter, the author describes the way the European Union (EU) has gradually developed its economic and monetary integration. He also describes the evolution from its hesitant start on a narrow legal basis to the development of the precursor of the EMU, the European Monetary System. The author examines the set-up chosen for the EMU and the criteria for membership. He discusses the independent monetary policy of the European central bank and the coordination of fiscal policies of the member countries. The author describes two important issues for the further development of the EU: the position of the UK and the road of the new member states towards the euro.