"European Economic and Monetary Union is a good thing for those involved because the advantages are guaranteed while the dangers might never become a reality." Explain and discuss this statement.
In order to explain and discuss the above statement, firstly it is essential to define and briefly explain what European Economic and Monetary Union (EMU) is. Secondly it is also essential to examine the advantages of membership alongside the disadvantages, finally there is a need to examine the dangers of being involved and discuss how likely it would be for these dangers to become a reality.
The new European single currency was introduced as a physical currency on Jan 1st 2002 across 12 European Union members. For all those involved the "Euro" was born and previous legal tender within these countries were withdrawn. What EMU actually involved was a uniformed monetary policy with common interest rates throughout the zone. "The long process of monetary integration was capped by the successful creation of EMU and European central bank 1999, and the remarkably smooth introduction of the Euro on 1st January 2002." (Wallace et al 2005, page 142).
The main aspects of EMU consisted of the setting of interest rates through the newly created central bank for all those in the zone. For all members this meant a move from previous intergovernmental power to supranational power with regards to decisions made in all areas relating to EMU. "Today, policy capacity in the monetary realm is truly supranational, with political authority firmly located at European level." (Wallace et al 2005, page 142). In order for integration of these policies to be viable there needed to be certain constraints on fiscal policy, in ...