Three Stages of EMU 

The Treaty envisages EMU being approached in three stages.  

Stage One began on 1 July 1990 and involved liberalisation of capital movements, progressing the completion of the single market and closer coordination of the economic policies of Member States.  

Stage Two began on 1 January 1994 and involved intensifying the co-ordination of Member States' economic policies, based on multilateral surveillance in the context of broad economic guidelines laid down under Article 103 of the Treaty by the Council of Economic and Finance Ministers, ECOFIN.  

In addition, Stage Two brought into operation the excessive deficit procedure set out in Article 104c of the Treaty. This requires an annual examination of each Member State's budgetary performance to see if it meets the deficit rules laid down in the Treaty, with the Council making a recommendation for ending the excessive deficit of any Member State which does not meet them.  

Stage Two also involved the setting up of the European Monetary Institute, or EMI. The EMI was the forerunner of the ECB and had, inter alia, the task of setting out the regulatory, organisational and logistical framework for the ECB to perform its tasks.  

Stage Three is the final stage of EMU and began on 1 January 1999. On that date the euro came into being and became the currency of the participating Member States (although it exists only in cashless form until 2002); the conversion rates between the currencies of those Member States and the euro were irrevocably fixed; and the ECB, which was set up on 1 June 1998, began operation of the single monetary policy in respect of it.