Before the creation of the Economic and Monetary Union (EMU), mutual influence on the economic policies of member countries was carried out mainly with the help of trade and structural policy instruments (pan-European transport projects, ecology, promotion of science and research, etc.) or microeconomic regulation (regulation of certain aspects activities of enterprises, for example, in the field of labor protection). In the 1990s, by decision of the Maastricht Treaty, the full range of funds was first used, including tools for macroeconomic regulation.
The Maastricht Treaty of 1992 established stringent convergence criteria necessary for the introduction of a single currency, the euro, which regulate ceiling levels:
- inflation, the rate of which should not exceed by more than 1.5% the average in member countries with the lowest price increases;
- interest rates on long-term loans, the values of which should not exceed more than 2 percentage points, the corresponding average for the three countries with the lowest price increases;
- the state budget deficit should not be more than 3% of GDP;
- public debt should not be more than 60% of GDP;
- within two years, the currency should not devalue and its exchange rate should not go beyond the limits of fluctuations established by the European currency system.
The Stability and Growth Pact 1997, concluded at the insistence of the FRG government, provided guarantees for fulfilling the Maastricht criteria by introducing an obligation for member countries to correct the situation within a year if the national deficit exceeded the limit of 3% or provided for financial penalties of up to 0.5% of GDP .
The EMU was formed in three stages and ended with the introduction of a single European currency, which gradually replaced national banknotes.
Inside EMU, the economic and monetary elements of integration are organically linked and cannot exist separately. So, a common economic policy is needed to form a single economic space on the territory of all member countries, and the currency union, serving this space, cannot function at significantly different national inflation rates, interest rates, levels of government debt, etc.