European Monetary Union – History and Benefits

May 2006

In January1993, the twelve member states of the European Community became the SingleEuropean Market. They were joined in 1995 by Austria, Finland and Sweden; andin 2004 by ten mainly Eastern European states to bring total membership to 25.

The singlemarket means the free movement of goods, services and finance, and the right towork and live in any Member State. The European financial common market,encompassing free movement of money and capital and freedom to provide servicesfor brokers and financial undertakings, is an essential part of that market. Ithas resulted in community businesses and individuals being free to invest theirmoney, open accounts and take out loans wherever they choose. Banks and otherfinancial institutions can now offer ‘financial products’ without restrictionand securities are quotable on all stock exchanges and issuable in all MemberStates of the Community. Insurance services can also be offered withoutrestriction.

Howeverexchanging currencies is a costly business, both for individuals who have topay a commission whenever they travel abroad, and for companies which areobliged to devote some of their administrative resources to currencytransactions. Therefore, the Single Market could only become more effectivewith the introduction of a Single European Currency (The Euro).

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