| Central Bank Governors | Governors of central banks in EU countries currently meet under the auspices of the European Monetary Institute to coordinate monetary policy at the European level. Since June 1998, when the European Central Bank was formed, central bank governors from those countries in the euro zone also sit on the ECB's Governing Council. Governors from outside the euro zone sit on the General Council of all European central bank governors. |
| Convergence Criteria | These are the criteria upon which a national economy's suitability for inclusion in the euro zone are judged. There are four basic criteria:
- 1. Inflation rates must be less than the average of the three lowest countries' inflation rates plus 1.5 per cent.
- 2. Public sector deficits must not exceed 3 per cent of the country's GDP.
- 3. Public sector debt should not exceed 60 per cent of GDP. However, if public sector deficit and debt is dropping sharply, a country may be allowed into the euro zone, even if it has not yet met the criteria.
- 4. Long-term interest rates can not exceed the average interest rate of the three member states with the lowest inflation rates by more than 2 per cent.
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| Ecofin |
The European Council of Economics and Finance Ministers, Ecofin handles EU legislation on tax
harmonisation, financial liberalisation and economic policy. Ecofin has the final say on many aspects of Emu. From Januar 1, 1999, Ecofin will also be responsible for the euro zone's external exchange-rate policy.
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| Economic and Financial Committee |
Will take over from the Monetary Committee as from 1 January 1999. The Committee will report to Finance ministers and to the European Commission on the economic and financial situation of all EU member states as well as the EU itself, and on financial relations with third countries and international institutions. |
| European Central Bank |
From 1 January 1999 the ECB will be the independent central bank of the Euro area. It has already taken over many of the duties of the European Monetary Institute (EMI). The bank will set short-term interest rates and has the sole right to issue Euro bank notes. The
bank will be run by a Governing Council, composed of an Executive Board of six members chosen by participating member states, and the governors of the national central banks. The former EMI President, Wim Duisenberg, is now ECB President.
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European System of Central Banks
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Will come into effect on 1 January 1999, composed of the European Central Bank (ECB) and the governors of national central banks. The ESCB's primary objective is to ensure price stability by defining and implementing the monetary policy of the Euro area.
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Opt-Out
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Under the Maastricht Treaty, those member states that formally declined to take part in European Monetary Union have 'opt-outs'. Strictly speaking, this only applies to Denmark and the UK. The UK has the right to "opt-in" during Stage 3 if it chooses. Denmark has already decided to opt-out completely.
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Synthetic Euro
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Is a theoretical calculation of the euro exchange rate, to show the broad trend of the Euro's value against other currencies in the period between the announcement of the bilateral conversion rates between particpating Emu currencies and the launch of the euro on 1 January 1999.
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