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The Treaty of Maastricht
The decisive step towards a unified, fully integrated, lasting and effective community of member states was the Single European Act (SEA ¡V come into force 1987), which was signed in Maastricht (¡¨Treaty of Maastricht¡¨) after a year of negotiations at government level. The Treaty of Maastricht, which came into force on 1 November 1993, is a covering agreement that creates a ¡¨European Union¡¨ with new aims.
The Treaty envisages a European Union based on three ¡¨pillars¡¨:
"« Economic and Monetary Union
"« common foreign and security policy
"« co-operation in the spheres of justice and home affairs
What exactly does the Treaty of Maastricht aim at?
"« common security
"« the introduction of a single currency that is comparable with the national currencies of the best performing member states
"« turning the single European currency into one of the most stable currencies world-wide
"« set up strong and balanced economic and monetary decision-making power
"« a stage-by-stage movement towards to the economic and monetary union
The timetable:
EMU (European Monetary Union) is the consequence of the Single Market which came into effect in 1993 and is indispensable for the for the smooth functioning of the Single Market. The introduction of EMU is to take place in three phases:
Phase A:
"« listing the participating Member-States
"« setting up the ESCB (European System of Central Bank) and the ECB (European Central Bank)
Phase A/II:
"« Production of banknotes and coins
"« Adoption of complete legal framework
"« National steering structure
"« Banking financial community changeover plan
Phase B:
"« Fixing of conversion rates
"« Euro becomes a currency
"« ECB conducts single monetary and exchange rate policy in Euros
"« Whole sale payment system in Euros
Phase B/II:
"« continue of changeover
"« public an private operators start changeover when ever they like to
Phase C:
"« introduction of notes and coins
"« completion of changeover
"« only use of the Euro
"« withdraw of the old coins and notes
"« completion of the changeover of private and public operators
What are the main elements of EMS (European Monetary System) ?
"« The Exchange Rate Mechanism (ERM)
"« The European Currency Unit (ECU)
The ERM was devised to minimise currency fluctuations.
The ECU¡¦s functions are:
"« Denominator for the ERM
"« Basis a divergence indicator
"« Denominator for operations in the intervention and credit mechanisms
"« Reserve instrument and a means of settlement between monetary authorities in the Community
It will be a basket currency, when the EMU is completed.
The five convergence criteria established in the Treaty of Maastricht are:
"« Inflation
The inflation rates may not be more than 1,5 % above the average of the three best performing members over one year
"« Interest rates
Long-term interest rates mustn¡¦t be above 2 % of the three best performing members, in terms of price stability
"« National budget deficit shouldn¡¦t exceed 3 % of Gross Domestic Product
"« National debt shouldn¡¦t exceed 60 % of Gross Domestic Product
"« Exchange Rate
Currencies must have respected the normal fluctuations margins provided by the ERM for at least the last two years.
These criteria are important for the stability of the Euro. So that it may establish as a world currency. Now they are called Stability Pact.
The participating member states are:
France, Belgium, Netherlands, Germany, Luxembourg, Austria, Italy, Finland, Denmark, Spain, Ireland and Portugal
The main opportunities that will occur through the Euro are:
"« End of Transaction costs
"« End of Currency crises and no more inswances currency fluctuations
"« Easy comparison of prices
"« Stabilisation of economic environment
"« Creation of a world currency
The Euro banknotes were designed by the Austrian Robert Kalina. One Euro will consist of 100 Cents. The following banknotes and coins will be issued:
"« Banknotes: 5, 10, 50, 100, 200 and 500 Euro
"« Coins: 1, 2, 5, 10, 20 and 50 Cents, 1 and 2 Euro
1 Euro are 13,7603 ATS.
The changeover from Schilling to Euro means that one system of measurement is replaced by an other, whereas the value of what is measured doesn¡¦t change.
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