ney' alongside national currencies, euro coins and banknotes were launched on 1 January 2002 and the biggest cash changeover in history took place.
3.Criticisms of the EMU
Concerns about the EMU center around loss of national sovereignty for each of the individual participating states. Some fear that the participating states may not be able to pull out of a national economic crisis without the ability to devalue its national currency and encourage exports. Others worry that the participating European states will be forced to give tax breaks to compete with each other and that companies may have to lower wages for their employees and to lower prices on goods that they produce. Because taxes continue to be levied at the national level and not by the EMU, tax policy cannot be used as a tool to help individual states that may be experiencing an economic downturn. In this way, the EMU differs from the United States which has both a single federal monetary policy and a primarily centralized tax system. In the United States, the residents of an individual state with a lagging economy can pay less tax and the residents of another state with a soaring economy can make up some of the tax deficit. In the EMU, because tax policy is not centralized, the other states cannot help out an individual participating state that is economically troubled by shouldering a greater proportion of the tax burden. Also, because the participating EMU countries vary so much culturally, the labor force in these countries is not nearly as mobile as between the states of the United States. Because the labor force is fairly stationary, problems of high unemployment may persist in certain individual EMU states while other countries may not be able to fill positions with qualified employees. Finally, some countries (like the United Kingdom) may fear that joining the EMU may pull their country down to the economic equivalent of the least common denominator, saddling them with the economic problems of countries with a less successful economy.
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SUMMARY
EMU is the agreement among the participating member states of the European Union to adopt a single hard currency and monetary system. The European Council agreed to name this single European currency the Euro. p> Economic and monetary union was a recurring ambition for the European Union from the late 1960s onwards because it promised stability and an environment for higher growth and employment. p> The road towards today's Economic and Monetary Union and the euro area can be divided into four phases:
- Phase 1: From the Treaty of Rome to the Werner Report, 1957 to 1970
- Phase 2: From the Werner Report to the European Monetary System, 1970 to 1979
- Phase 3: From the start of EMS to Maastricht, 1979 to 1991
- Phase 4: From Maastricht to the euro and the euro area, 1991 to 2002
The transition to EMU is comb...
