After two world wars in less than a century,
many people sought the means to prevent such devastation
from happening again. One idea put forward
by a French civil servant, Jean Monnet, and taken up by France’s foreign minister
at the time, Robert Schuman, was to pool the industries that were seen
as the engines of war: coal and steel. In 1951, six countries – France, Germany,
Belgium, Italy, Luxembourg and the Netherlands – signed the Treaty of Paris,
creating the European Coal and Steel Community, governed by the first supranational body:
the High Authority. Europe’s leaders wanted to go further,
so on 25 March 1957, they signed the Treaties of Rome, creating the EEC (the European Economic Community) and Euratom (the European Atomic Energy Community). In 1968, the Prime Minister of Luxembourg,
Pierre Werner, proposed a single currency. The Werner Report, published in 1970,
called for step-by-step progress towards Monetary Union within ten years. But a year later, the US devalued the dollar. Then, there was an oil crisis
and the Werner plan was shelved. So, instead of a monetary union,
some countries in Europe introduced what was called the “currency snake”,
which set limits on exchange rate fluctuations both against a number of European currencies
and against the dollar. Between its creation in 1972 and
its demise seven years later, the snake saw a lot of
exchange rate adjustments and a veritable revolving door of countries
joining, leaving, and then rejoining again. In 1979, the push for
Economic and Monetary Union was revived. The European Monetary System was born
and the European Currency Unit, or ECU, was created. The ECU, however, was only a virtual currency,
a mere unit of account. Within the European Monetary System,
the Member States agreed to keep their currencies within a fluctuation band of 2.25%
around a central reference rate. This was the start of the exchange rate mechanism. The governments of the Member States
didn’t always find it easy: there were 37 currency realignments
between 1979 and 1987. In 1986, the Member States
signed the Single European Act, which marked the first substantial changes
to the Treaty of Rome. The objective of the Single Act
was to create a true internal market by 1993, based on the free circulation of goods, people,
services and capital, with no non-tariff barriers. In 1988, the then President
of the European Commission, Jacques Delors, was appointed to chair a committee whose findings
were to become the basis of the Maastricht Treaty. The Delors Report envisaged
a three-stage progression towards Economic and Monetary Union. Stage 1 focused on increasing
the cooperation among central banks and was adopted as of 1 July 1990, when the movement of capital in the European Community
was liberalised completely. The Treaty on European Union
was then signed in Maastricht on 7 February 1992. It laid out the framework and the further steps for achieving Economic and Monetary Union,
and making it work. The Treaty established 1994 as
the beginning of Stage 2. This phase would bring about
economic convergence, as well as the institutions and procedures
needed to achieve it. The Treaty set out the convergence criteria
which Member States had to fulfil in order to be considered ready
for the adoption of the single currency. Stage 2 saw the creation of
the European Monetary Institute which began its work in Frankfurt
on 1 January 1994. The EMI carried out all
the preparatory work necessary for the ECB to assume its
responsibility for monetary policy. In May 1998, EU leaders and
finance ministers met in Brussels to decide which states had reached
a sufficient degree of convergence and could therefore participate
in the Monetary Union. They also appointed the first President
of the ECB, Willem Duisenberg, and the other members
of the first Executive Board. The ECB was established
on 1 June 1998, replacing the EMI and
taking over its Frankfurt offices. Together with all the national central banks
of the Member States of the European Union, the ECB came to form
the European System of Central Banks. On the night of 31 December 1998,
the euro was born and the conversion rates of the currencies
participating in it became irrevocably fixed. Stage 3 began on 1 January 1999,
when the single currency was launched and authority over monetary policy
was transferred from national central banks to the Governing Council
of the European Central Bank. Three years later,
on 1 January 2002 the new banknotes and coins
were introduced amid widespread celebrations. People queued at cash dispensers to be among the first to have
the new currency in their pockets. For three years, the euro had been
the official currency for banks, businesses
and the financial markets, but now it belonged to everyone.