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EU economic and monetary union



Article 119 of the Treaty on the Functioning of the European Union

Article 140 of the Treaty on the Functioning of the European Union


  • Article 119 states that the European Union (EU) and EU Member States will coordinate their economic policy and define and implement a single monetary policy and exchange rate policy. It refers to the introduction of a single currency, the euro, and lays down some guiding principles.
  • Article 140 states that Member States must meet specific ‘convergence criteria’ if they are to enter the third stage of the EU’s economic and monetary union (EMU). The third stage involves adopting the euro as currency and implementing a single monetary policy in the Member States concerned.


  • EMU is the process of aligning economic and monetary policies in the Member States. It comprises three stages.
    • First stage (1990–1993). Free movement of capital between Member States.
    • Second stage (1994–1998). Coordinating Member States’ monetary policies, increasing cooperation between their national central banks and bringing their economies closer together (i.e. economic convergence).
    • Third stage (1 January 1999 onwards). The gradual introduction of the euro and implementation of a single monetary policy under the responsibility of the European Central Bank (ECB).

While the first two stages of EMU have been completed for all Member States, the final stage is not yet complete. To date, just 20 Member States – referred to collectively as ‘the euro area’ – have adopted the euro as their currency.

Transition to the euro

  • Before it can introduce the euro, a Member State must first meet several economic and legal requirements – the convergence criteria.
  • The purpose of the economic convergence criteria is to ensure that the EU has a stable economy and financial situation.
  • The legal convergence criterion stipulates that Member States’ laws must be compatible with the EU treaties, particularly on the points relating to the national central bank and the currency.
  • When a Member State meets all these requirements, it can adopt the euro as its currency. The euro then replaces the former national currency and becomes that country’s official currency.
  • At least every 2 years, the European Commission and the ECB assess what progress Member States have made towards meeting the convergence requirements. If they judge that a Member State is able to move on to the third stage of EMU, the Council of the European Union takes a decision that the Member State concerned can adopt the euro as its currency.

European Central Bank

The ECB plays an essential role in EMU. It independently determines the monetary policy of the euro-area Member States. It also holds the power to authorise the issue of euro banknotes. Member States may issue coins, but the ECB must first authorise the annual amount to be issued.

The first countries in the euro area

  • On 3 May 1998, a historic date as regards the launch of the third stage of EMU, the Council adopted a decision acknowledging that 11 Member States (Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland) had met the necessary conditions to introduce the single currency on 1 January 1999. In 2000, a similar decision was taken for Greece, which entered the third stage of EMU in January 2001.
  • The euro was then introduced in two steps.
    • 1 January 1999. The euro was introduced as book money* and the conversion rates were fixed with the former national currencies, which thus became non-decimal units of the euro.
    • 1 January 2002. Euro coins and banknotes were introduced in the relevant Member States. European citizens and businesses could then make their cash payments in euros.

Expansion of the euro area

  • In principle, all Member States are supposed to join the third stage of EMU and thus to adopt the euro. However, some have not yet met the economic and legal requirements. They are exempted until such time as they can introduce the euro.
  • The euro area has expanded several times to include more Member States:


Denmark has an opt-out from participating in EMU, the details of which are set out in Protocol No 16, annexed to the EU’s founding treaties. Denmark has reserved the option of ending its exemption arrangements and applying to adopt the euro, but has not announced any such intention.


For further information, see:


Book money. Money which is not in cash form and therefore not circulating in the form of banknotes and coins.


Consolidated version of the Treaty on the Functioning of the European Union – Part Three – Union policies and internal actions – Title VIII – Economic and monetary policy – Article 119 (ex Article 4 TEC) (OJ C 202, 7.6.2016, pp. 96–97).

Consolidated version of the Treaty on the Functioning of the European Union – Part Three – Union policies and internal actions – Title VIII – Economic and monetary policy – Chapter 5 – Transitional provisions – Article 140 (ex Articles 121(1), 122(2), second sentence, and 123(5) TEC) (OJ C 202, 7.6.2016, pp. 108–110).

last update 23.02.2023