EUROPEAN-MONETARY-UNION

On January 1, 1999, eleven nations in Europe plan to begin a process o f replacing their national currencies with the Euro. The adoption of t he Euro is unprecedented; never before have so many countries surrende red their national monies for a common currency at a single stroke. In this way, the launching of the Euro means that European countries wil l be entering uncharted waters. But, as the author points out, Europea n Monetary Union is the latest stage in a historical process that bega n in the wake of the collapse of the Bretton Woods system in the early 1970s and has progressed in fits and starts since that time. The disc ussion briefly reviews the events leading up to the adoption of the Eu ropean Monetary System in March of 1979 and the associated Exchange Ra te Mechanism. It goes on to describe the requirements of the Maastrich t Treaty and to review the costs and benefits of a common currency. Th e author also considers the importance of European Monetary Union (EMU ) from a U.S. perspective: If it promotes growth in Europe, he notes, then it will be beneficial for the United States as well, since we ben efit from a strong Europe. He cautions, however, that the economic via bility of the Euro depends on a smooth transition. And should EMU fail , adverse political complications could follow, whatever the economic consequences.