What Is The European Monetary Union?

2020-07-10 17:23    forextraders

European Monetary Union Definition. The European Monetary Union, or EMU, is an agreement by participating European Union member countries that includes protocols for the pooling of currency reserves and the introduction of a common currency. The principal goal of the EMU was to establish a single European currency called the Euro, which officially replaced the national currencies of the member EU countries in 2002. The advent of the Euro was the latest episode in the continuing saga of attempts to move towards economic and monetary integration in Western Europe. Political moves towards monetary cooperation in Western Europe began at the end of the Second World War. Initially there was the Bretton Woods “adjustable peg” system, followed by the “Snake”, which was replaced by the European Monetary System, EMS. The EMS collapsed in 1992. Each attempt failed due to unstable membership rules and the lack of a central authority to dictate corrective economic action. The difference with the Euro this time around was that a coordinating infrastructure was put in place, and to prevent a return to old ways, the European Commission disbanded all national currencies for its members. The Euro now exists as a banking currency and paper financial transactions and foreign exchange are made in Euros.

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