- See also:
-
ECONOMIC AND MONETARY UNION (EMU)
The Economic and Monetary Union (EMU) is an integral part of the European Union. All the EU Member States participate
in the EMU in one way or another. When a country joins the EU, it becomes a country with derogation. Full membership in the EMU is
obtained by the adoption of the euro.
The Economic and Monetary Union is founded on two pillars.
The first pillar of the EMU, which concerns all Member States, is the harmonisation of
national economic and fiscal policies. To that end, all Member States compile regular economic programmes (stability or convergence
programmes) that are then coordinated among themselves and with the European Commission. The programmes are aimed at fulfilling the
Maastricht criteria (if the country has not joined the euro area) or adhering to the balanced budget requirements as laid down in the
Stability and Growth Pact (in the case of euro area countries). In addition, most of the sub-sectors of economic policy are also
coordinated among the Member States and institutions (for more details, see Coordination of Economic Policies).
The second pillar of the EMU is the European Union's single monetary
policy, which is implemented by the European System of Central Banks and the European Central Bank. The goal is to maintain a low
inflation rate, that is price stability. The single monetary policy is implemented only in those Member States that have fulfilled all
the Maastricht criteria and have joined the euro area.
Criteria for joining the Economic and Monetary Union:
| Criterion |
Principles |
| Price stability |
The applicant country's inflation rate must not exceed by more than 1.5 percentage points the average
inflation rate of the three Member States with the lowest inflation rates. |
| Interest rates |
The interest rate on the long-term (10-year) government bond issued in the applicant country's currency
must not exceed by more than 2 percentage points the average long-term interest rate of the three Member States with the lowest inflation
rates. |
| Exchange rates |
The applicant country's currency exchange rate must not fluctuate by more than ±15% against the euro
during the exchange rate mechanism (ERM II) period. |
| Government finances |
The annual budget deficit of the applicant country must not exceed 3% of the country's annual GDP. |
| Government debt |
The general government debt of the applicant country must not exceed 60% of the country's annual GDP. |
Estonia's accession to the Economic and Monetary Union
The Estonian Government and the central bank have set a goal to join the euro area at the first opportunity, that is as
soon as Estonia fulfils all the necessary requirements. Today, Estonia meets all the requirements but one - inflation is higher than
allowed. According to the latest economic forecasts, Estonia will not be able to meet the inflation criterion in 2008. As inflation
forecasts covering longer periods than two years are not very accurate, the exact accession date has not been determined yet. The public
will be notified of the time of the changeover at least 12 months in advance.
|
First, in order to become a full member of the EMU a country has to elaborate a national economic and fiscal policy
programme and be able to implement it.