Módosítva                                                       2005.03.30.                                                       Create date

In the late 80’s a plan was born for creating the institutional framework for the even closer cooperation, for establishing the European economic and monetary union. Still the plan was only accepted in 1991 when the Maastricht treaty was signed establishing the European Union and laying down the foundations of the single currency and the European Monetary Union. It’s implementation already started in 1990. The conception was to create the final single currency through three stages.

• Stage one (1 July 1990)

  • Free movement of capital

  • Assigning convergence criteria

• Stage two (1 January 1994)

  • Establishing the EMI (European Monetary Institute)

  • Independence of national banks

  • Prohibition of financing the budget deficit with monetary instruments (from central bank loans)

• Stage three (1 January 1999)

  • One single currency

  • One common central bank, the ECB (European Central Bank)

 So in the first stage the requirements, which all applicants have to meet if they want to join the community, were set up. These are the following ones:

• The inflation rate may not exceed the average rate of the three states with the lowest inflation by more than 1.5%
• The budget deficit may not be over the 3% of the GDP
• Long-term interest rates may only be, at most, 2% higher than that of the three states with the lowest inflation rate
• Exchange rate stability, meaning that they pay extra attention to any kind of interaction for two years before the start

Maybe the most important element of the second stage was the establishment of the EMI, which is considered to be the forerunner of the ECB.  Its objective was to help the cooperation between the central banks of the member states and, after a while, to take over their role and unite them. Not long after this, another meeting took place in Madrid in December 1995, where the final decision was made about the start of the single currency in the beginning of 1999 and about not calling it ECU after that. The possible recommendations for the name, of course, were depending on the national identity of the states. In France they would have liked to call it Eurofranc, the Germans recommended Euromarc and the English idea was to name it Europound. The Dutch proposal finally ended the demur: „Gentleman, what if we used the first four letters”.

One year later, in December 1996 in the Dublin Summit the new exchange rate mechanism, ERM II was a main topic and another one was to create the required legal conditions for the transition to Euro.  In 1998 the final decision about the member states was made. Great-Britain, proving their notorious stubbornness and their separation from the „continentals”, decided to retain the centuries old, well known and well working currency, the English pound, rather than replacing it with a doubtful and uncertain lash-up. Denmark and Sweden also stayed out of it of their free will. Sweden had a conception of fixing the conversion rate of Swedish krona one-on-one to Euro, with both currencies in use and only returning to their national currency in case of „emergency”, but it only remained a conception. Greece, of course, wanted to become a member of the EMU, but they could not meet the convergence criteria, so they had to stay out, as it later turned out, only temporarily, as in 2000 they got the chance to enter EMU, so the recent transition includes them just like the other 11 states. A month later the European Central Bank was established in Frankfurt as the descendant of the EMI, top managers were appointed and the date for introduction of the cash form Euro was set to 2002. It was the time for preparing the monetary institutes and the companies for the transition.

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