Having traced the history of European economic and political integration since the Second World War (Chapter 1), and the long process of European monetary integration prior to the advent of the euro (Chapter 2), we now turn to examine the euro’s emergence and the economic principles upon which the new currency rests. We begin by charting in some detail the three main landmark events since the mid-1980s that shaped the transition to economic and monetary union (EMU) in Europe and the launch of the euro in January 1999. 3.1 3.1.1 THE TRANSITION TO EUROPEAN ECONOMIC AND MONETARY UNION The Single European Act (SEA), 1986 As discussed in Chapter 1, section 1.2, the process of European market uniﬁcation began when the six founding members of the European Coal and Steel Community signed the Treaty of Rome in 1957. You will recall that the Treaty of Rome established a customs union, the most important features of which included measures designed to eliminate all internal customs duties and trade restrictions between its six member states, and the introduction of a common external tariff on goods from the rest of the world. Although by the end of the 1960s the European Economic Community (EEC) had succeeded in eliminating internal tariffs and quotas on trade between its member countries, there remained various, what we might call ‘administrative’, barriers to trade which were a drag on the free movement of goods and services. For example, in Europe’s car market, trade was discouraged by the imposition...
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