Initially an economic organisation, the European Community is now active in many other areas too. Te first practical step on the road to European integration was taken in 1951 with the signing of the Treaty establishing the European Coal and Steel Community. Then, in 1957, Belgium, the Netherlands, Luxembourg, Germany, France and Italy signed the Treaties of Rome. One Treaty introduced common economic policies, especially on agriculture and, in 1968, a customs union. Te other was the Euratom Treaty on nuclear energy.
The Community gradually branched out into other areas. In 1986 the European Single Act provided for the free movement of people, goods, capital and services and established many new policies. In 1993 the Treaty on European Union (Maastricht Treaty) entered into force. It introduced the pillar structure: the European Community is the first pillar, foreign policy the second, and justice and home affairs the third.
In 1997 the Treaty establishing the EC was amended once again, this time at Amsterdam. Consumer policy, employment, growth and the free movement of people were amongst the most important issues dealt with.
More particularly, the history of monetary integration began in 1968 with the Werner report, which set out a blueprint for the stage-by-stage realisation of economic and monetary union. In 1979 the European Monetary System was established: bilateral rates were determined between all currencies in the System, which were allowed to fluctuate within pre-set margins around these rates. At the centre of the EMS was the ecu, a basket currency, made up of fixed percentages of the participating national currencies. In 1989 the Delores report laid the foundations for the euro and the Maastricht Treaty of 1992 provided a legal basis for EMU and the single currency.
The Maastricht Treaty provides for EMU in three stages: the first, beginning on 1 July 1990, is mainly about the free movement of capital; the second, starting on 1 January 1994 is concerned with preparations for the single currency, including the setting up of the European Monetary Institute, which is to be dissolved in the third stage, beginning on 1 January 1999. This last stage will centre on the establishment of the European Central Bank and the introduction of the single currency.
The main convergence criteria laid down by the Maastricht Treaty are as follows: an inflation rate not more than 1.5% above the average rate of the three Member States with the lowest inflation; a public budget deficit not exceeding 3% GDP; public higher than the average rate of the three Member States with the lowest inflation; and no currency fluctuations outside the normal EMS margins for two years and no serious strains or devaluations.
The secondary convergence criteria are integration of markets, balance of payments, labour costs, price indices and ecu trends.…
