ABSTRACT
This chapter offers a balanced and largely non-technical explanation of the economic effects of the European Single Currency, the Euro, and considers some of its political implications. Economic and Monetary Union (EMU) is the adoption of a single common monetary unit by participating members of the European Union (EU). In economic parlance, the European Central Bank (ECB) is instrument independent since it is able to choose the level of interest rates it believes necessary to meet its inflation target. In terms of democratic control, the ECB is not unlike other aspects of the EU. Overall control is in the hands of member states' governments either in their appointments to head national central banks or through the European Council for the appointment of the President, Vice-President and Executive Council. The Stability and Growth Pact is designed to control the overall balance of budgetary policy across the Euro-zone so that it is consistent with the ECB's primary aim of maintaining price stability.
