European monetary integration

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Contents:

1. Introduction ............................................................................ ...........3

2. General aspects...............................................................................4 Essential principles of administration of the European Monetary Union and the steps to achieve them

Cockfield & cecchini report The benefits of the monetary union

3. Convergence savings - necessary condition for participation European union ...............................................................................13

in

monetary

4. The evolution of European monetary integration ................................15

European Central Bank Euro - the new currency of the European Union

5. Pros and cons of forming economic and monetary union in Europe... 21

6. Romania's

Integration

in

the

European

Monetary

Union ......................24

7. Advantages and disadvantages of integration of Romania in EMU 28

8. Bibliografy................................................................................................ ......... 30

[Link]
If the world are weighing ways to combat the negative effects of financial globalization, and international cooperation is difficult to achieve, national interests are hardly harmonized worldwide, have sought solutions to the regional level. In this respect, the European Union and Monetary Union is an example of resolving regional failures of global coordination of monetary and financial policies. The European Union is an economic-social and political construction, a kind of consistency and different traditional forms of grouping interests of economic and social scale societal. Currently, the European Union is in the construction phase of economic and monetary union. Regarded as a higher stage of integration multinational economic and monetary union is the result of deepening of integration and intensification involves: - Common monetary policy - Close coordination of economic policies of Member States - Single currency
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- Liberalization of capital flows - An institutional system to coordinate and administer monetary policy. Provided the basis for the creation and operation of an integrative forms of the type of economic and monetary union is the existence of a common market of goods and services, although in the case of EU economic and monetary union is more associated with the single internal market. Stage of economic and monetary union, which involves removal of the exchange rate and implementing a common monetary policy leads to the reduction of costs and risks that previously were able to enhance or, where appropriate, to prevent interpenetrarea capital markets to generate distortions in the functioning of the common agricultural or industrial policy does not permit a development unit that will lead to a common market in the field.

2. General aspects Essential principles of administration of the European Monetary Union and the steps to achieve them
The idea of monetary unification was based on the theoretical concept of optimum currency areas developed by the authors of Mundell (1961) and Mckinnon (1963). According to this theory, those countries that meet a number of specific features of interest have to choose between fixed rates and a single currency. The first attempt to monetary unification in Europe occurred at the Werner Report (after the name of Luxembourg Prime Minister Pierre Werner, who chaired the working group, which was to prepare this report), in 1970, which outline a goal for monetary union year 1980 and provide: - Conversion of currencies; -Reducing fluctuations in exchange rates to fixitatea the irrevocable parities;
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- Free movement of goods, services and labor; - Free movement of capital; - Establishment of an integrated system of central banks, including central banks of Member States; - Introducing a single currency. Although the plan was not materialized, its objectives appear as precursor of the latest plan of the Monetary Union. In 1986, the French government launched the idea of European monetary unification and addressed in this regard, a memorandum partners in the European Community. Council of Europe decided on 28 April 1988, to entrust a committee, chaired by Jacques Delors, the mission to establish and propose concrete steps needed to achieve Economic and Monetary Union (EMU). Final architecture of the EMU was established at the meeting in Maastricht, where the 9-10 December 1991, the Heads of State and Government of the European Community have signed the treaty that founded the political-legal, and European Monetary Union. The Maastricht Treaty defines the essential principles of monetary unification and establish stages of completion. The essence of monetary unification are: - European Union form a free market, based on monetary stability and economic growth, employment, environmental, budgetary and financial relationships farms, social cohesion; - Shift from economic union to economic and monetary union by creating a single European currency (euro), the creation of new financial institutions (European Central Bank), responsible for the common monetary policy and, in particular the control of price stability, where has full authority; - Free movement of persons, goods, services and capital within a common market in which to operate a single currency; - Promoting a common policy by the countries in financial and monetary terms, based on the following convergence criteria: - Budget deficit not exceed 3% of GDP; - Public debt (internal and external) to be less than 60% of GDP; - Inflation rate does not exceed by more than 1.5 percentage points the average inflation of three countries in EMU with the lowest inflation;
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- Long-term interest rate does not exceed by more than two percentage points the average longterm interest rates in three states with the lowest levels; - The rate of national currencies should remain in the run-European single currency within the fluctuation limits stable without pressure or devaluation. On 1 July 1990 began the first stage of EMU and lasted until the end of 1993. During this period were laid the foundations for the European single market were liberalized capital movements between Member States. On 1 January 1994 began the second stage of EMU, which lasted until the end of 1998, and which were made as follows: - According to art. 109 TEU (Treaty on European Union), has created the European Monetary Institute (IMF), based in Frankfurt, the forerunner of the European Central Bank; - Have started the coordination of economic policies at European level; - Began the fight against excessive deficits and have implemented policies of economic convergence of Member States; - Was adopted on 31 May 1995, reference scenario for the changeover to the single - Between 15-16 December 1995 European Council set in Madrid, the euro single currency, technical scenario introducing the euro and the changeover to the single currency since 1999; - Between 16-17 June 1997 European Council, Amsterdam, the final set on the basis of relative use of the euro, the Stability Pact and the growth and mechanism of exchange which will replace the European Monetary System; - 2 May 1998, Heads of State and Government nominated the Member States will first use the single currency on the basis of the convergence criteria and depending on the economic results of 1997, these states were: Austria, Belgium, France, Finland , Germany, Iceland, Italy, Luxembourg, Netherlands, Portugal and Spain. The third stage started on 1 January 1999 and comprised two phases of the transition scenario, namely: - Phase B - 1 January 1999 to 31 December 2001; - Phase C - 1 January 2002. Between 1 January 1999 and 31 December 2001 there was a transition period in which the single currency only worked as account currency alongside national currencies. From 1
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January 2001 and Greece joined the monetary union. From 1 January 2002, the European System of Central Banks (ESCB) has progressively introduced into circulation of euro notes, which have moved in parallel with national currencies and tickets, which were withdrawn gradually from circulation. States that joined the euro have established different effective withdrawal from circulation of national currencies. Basically, from 1 January 1999 Europe has entered a new era, represented by the entry into force and effective functioning of Economic and Monetary Union and the launch of the euro as its currency. EMU has a huge significance not only for Europe but for the entire economic system and international monetary, as a model for other attempts at regional integration. Countries of Central and Eastern Europe, including Romania, EMU sesiznd bid, negotiate and prepare the desiderata of transition, adapting their legal regulations for the purpose of joining the European Union. In turn, the EU has undertaken efforts in the direction of monetary integration of the countries of Eastern Europe, efforts have become widespread, especially after the Treaty of Amsterdam (1998), laying the foundation for creating a zone of monetary ERM II (Exchange Rate Mechanism II) to the applicant. Specialists view that the monetary integration of these countries, which sooner or later will become members of the European Union, could be achieved: - Before the economic integration (less likely); - With European integration (if the negotiation process will be long); - After the economic (and variation agreed by the EU), with the passage in advance by the ERM II. Whether you will integrate into the EMU, the new Member States will be obliged to adopt the acquis communautaire of the second phase of EMU, which involves: - Ensuring the independence of central banks; - Coordination of economic policies (national convergence, multilateral surveillance, excessive deficit procedure, etc.). - Accession to the relevant provisions of the Stability and Growth Pact. New Member States will withdraw from any direct funding of public sector deficits by the central bank and the privileged access of public authorities in public institutions. Also, these
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countries should liberalize capital movements, to participate in the mechanism of exchange and to avoid excessive variations of exchange rates. In the European Union and Monetary fulfills a fundamental role in the European System of Central Banks (ESCB), which began to function once the cessation of function of the European Monetary Institute, ie the end of the second phase of EMU. According to the provisions of the Treaty on European Union, the European System of Central Banks shall be composed according to art. 106 (1), from: - European Central Bank (ECB); - Central banks of all 15 European Union Member States. Meanwhile, the Eurosystem includes the ECB and national central banks of Member States of the European Union that have adopted the euro. Central banks in countries that have not adopted the euro are members of the ESCB with special status, ie they allow the leadership of national monetary policies, but do not take part in adopting and implementing decisions regarding the single monetary policy for the euro area. According to art. 3 of Protocol no. 18 Status of the European System of Central Banks, the main objective of the Eurosystem is to maintain price stability. Without affecting this objective, the ESCB supports the general economic policies in the European Union, acting in accordance with the principle of a market economy with free competition and promotes an efficient allocation of resources. Also, according to art. 105 and 109 of the Maastricht Treaty and art. 3 of the Statute of the European System of Central Banks, ESCB's main objectives are: - Defining and implementing the single monetary policy in the euro area; - Management of foreign exchange operations; - Maintaining and managing the official foreign reserves of the Member States; - Promoting an efficient payment system. However, the Eurosystem intends to contribute to policy coordination components of the prudential supervision of credit institutions and financial system stability. According to art. 5 of the Statute, to meet the objectives proposed, the European Central Bank (ECB), together with national central banks must collect the necessary statistical information either from the competent national authorities or directly from economic agents.
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Fulfilling the mission and functions of the ESCB and the ECB shall, in accordance with art. 7 of the Statute, by the principle of independence, that neither the ECB nor a national central bank can not seek or accept instructions of the institutions or bodies or governments of Member States. Institutions or bodies and Member State governments can not influence the decision of the ECB in carrying out their duties, Statute contains provisions for ensuring the independence of members of the management of the ECB. In order to carry out their operations, the ECB and national central banks may open accounts of public bodies, credit institutions and other market participants, accepting securities as collateral. The main operations performed by the ECB and national central banks are: - Operation of open-market interventions on the capital market, either through sales and purchases of securities firm or take over the board through loans or debt securities and negotiable; - Credit operations performed by credit institutions and other market participants; - The reserves (ECB is empowered to require credit institutions of member countries the establishment of reserves in its framework and the national central banks, the ways of calculation and determination of the amount required is determined by the Board of Governors); - Transactions with public bodies; - Operations as a fiscal agent, in the bodies concerned; - Systems of clearing and payments (the ECB and national central banks may provide facilities to ensure the effectiveness and robustness of the compensation and payments); - Foreign Operations (ECB and national central banks may interact with central banks and financial institutions of third countries, with bodies of international financial and banking; can traded at the deadline or any type of reserve assets and exchange of precious metals ; can perform all types of banking transactions with third countries and international bodies. Single Market, effective and fully operational, has been a fundamental condition for effective introduction of the single currency on 1 January 2002 and, therefore, for European monetary unification. The main objectives of establishing the Single Market were: - Remove all quantitative restrictions and legal or administrative barriers that still persisted in the goods market access;
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- Remove all restrictions on capital transactions via short-term and long; - Remove all barriers to trade in services (banking, insurance, transportation); - Abolition of physical and fiscal boundaries within the European Union. Market firms easier access to business opportunities in the markets of partner countries, its economic impact consisting in: - Increasing the integration of markets; - Increased trade and investment transactions; - Increased competition and competitiveness, which led in turn to economic growth and lower unemployment. The need and requirements of integration of European financial and banking have been developed for years, encouraged and promoted on the basis of large studies that have employed various collective specialists. Among the most important study is notable in the report and COCKFIELD Cecchini report. Drafted in 1985 for the European Commission, COCKFIELD report has highlighted the need to eliminate all restrictions on international capital mobility, as a prerequisite for achieving full market, financial services and the administration of the integrated market in all its dimensions. Also, a proposal of the report was that the introduction of clear demarcations between what should be harmonized (minimum capital requirements, own funds, the limits on exposure to large risks, the insurance of deposits, the banking employment, quality control mechanism internal) and what I had accepted, through a mutual recognition that national legislation. Drafted in 1988, Cecchini report showed the benefits of the single market from the estimation of its main advantages, namely: - Lower prices for banking and financial services; - An increase in overall efficiency in the economy, determined by subtracting the costs of financial services and banking; - Increasing access to broader categories of markets, instruments and services, in terms of portfolio diversification and better monitoring of risks; - A better efficiency in using capital. Although Cecchini Report conclusions were not accepted in full, they pointed out ways in which capital market can significantly contribute to increased efficiency banking business, the
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economy as a whole. In terms of a diverse range of financial services, sometimes differ from country to country and subject to specific regulations, national liberalization in financial services and capital movements seemed difficult to achieve. Prudent way of establishing a common financial space involved, first, the gradual harmonization of the conditions for the establishment and functioning of institutions and financial products and subsequent opening of the competition between them. When the capital movements were liberalized, the problem was either to surrender foreign exchange rates determination, or autonomy in national monetary policies. The first solution was not accepted because not only mean the cancellation of the entire experience of European monetary unification, but also to dispense with the idea of European financial space. Therefore, the only solution left was waiving the monetary authorities, namely the control exercised by the national volume of bank loans and hence the monetary area. All issues presented before us to accept the idea that we are moving increasingly towards a triple world currency . If the initial North America (U.S. and Canada) was the only real economic power, it was the second pole in the area of Asia (Japan, South Korea, Hong Kong, Singapore, Taiwan), and lately it reinforces the third pole of concentration economic on the European continent, specifically in Western Europe. Monetary integration is the name of the formation of a monetary zone, an area in which the currencies of several countries are either connected or irrevocably binds each currency is irrevocably by the "anchor" on a particular report or national currencies are replaced with a single currency, which will be used throughout the area. So in one case, and the other, we face a process of monetary unification. A monetary union formed in this way must match an optimum currency area, is understood through an economic space which can take the same monetary policy: countries give up their own monetary policy, to use monetary policy instruments, particularly in the course currency in favor of a monetary policy and common course. There are certain costs arising from the use of the waiver rate in situations in which such a tool could help to overcome some shocks, especially external (eg, the surge in prices of energy or raw materials imported): sharp increase of prices in the interior, decreasing competitiveness external recession, unemployment, etc. external imbalance. If the country that promotes an
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independent monetary policy, may appeal to the exchange rates, currency depreciation, the stimulating effect on exports, could possibly absorb partial unemployment and appreciation could mitigate imports. Disappearance instrument currency country was obliged to use other macroeconomic policies to maintain competitiveness, to restore external balance and to keep jobs or to absorb the surplus labor force. Countries wishing to form a monetary union together, because the risks and costs to be as low must have an intense mutual trade. Mobility of factors of production - the labor and capital - must also be intense, to offset the costs of shocks which may be subject to a certain country. The fulfillment of these conditions is reflected in the existence of close or similar goals in macroeconomic policy (employment, inflation, external balance, etc.).. In terms of the European Union, following the formation of favorable demand and monetary union: As published in the Eurostat, the European Union countries, like other developed economies, is characterized by a independent economic growth, expressed by increasing the share of mutual trade in GDP - the level of expression of opening outwards. As a result, a close cooperation of all measures affecting trade becomes mutually binding if they want some common goals. The existence of the internal market, a single Community market, which operates the four freedoms of movement: goods, services, capital and persons. Full benefits, full of such liberalization can be achieved only by avoiding the costs of many plans to use different currencies. A monetary union is in fact a continuation of earlier stages of integration steps in a particular factor contributed to the progress of integration: trade liberalization in the first phase, the formation of the customs union, free circulation factors in the formation phase and a common market union. Is the currency in the present moment to contribute to the progress of integration, lead to a monetary union with the benefits and support to represent a political union. Since the domestic market, by removing all barriers to trade, including customs border control, means the impossibility of any protection at borders, in the absence of monetary union, some countries may be inclined to practice for competitive devaluation. Liberalization of capital movements, essential component of the internal market, undermine the effects of an independent monetary policy. Moreover, the obligation to coordinate their monetary
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policies or to implement a single monetary policy to respond to the effects of capital movement. Another argument in favor of monetary union with a single currency means that the EU wants to increase its competitive strength in the global context, a single currency will contribute to enhance trade not only in the area, but also in relations with the rest of the world to increase the volume of financial operations. In this way, the positive effect of the savings due to the size of economic activity "- the important aspect in competition with major American and Japanese companies. The benefits of the monetary union Switching to a single currency brings first advantage of avoiding the risk of currency - the currency depreciation for exporters receivable or the payment for importers - existing whenever the issue of converting currencies whose courses may change over time in one sense or another. Rates cover the risk, especially if a large instability of course, assumes special operations hedge (hedging, the management structure of holdings in foreign currency through swap operations, etc..) Whose costs are high. Transaction costs are higher for smaller States, open, whose currencies are little or no use. Such coins registers and large difference (spread) between the selling and buying, just because of their less frequent use. Eliminating the risk rate can stimulate economic activity, including investment, thus encouraging the allocation of resources to create jobs and economic growth. Acting in the same direction and price advantage of speech in the same currency which makes them easily comparable price for the same goods on different markets. All these advantages show that a stable course of education is floating, fluctuating, that result from economic conditions that generate stability. Important benefits of monetary union can exist at the macroeconomic level (greater stability of prices and increase the credibility of monetary authorities - essential to the smooth functioning of monetary policy). The fact that the Central Bank of monetary union is independent, is the nature of this high credibility. It also liberalized the financial market as it exists in a monetary union, will contribute to a better allocation of resources. 3. Convergence savings - necessary condition for participation in European monetary union

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Approaching through economic trade and other economic flows and foreign economies are convergent support for a monetary union, removing the need for adjustment through the courses. The Maastricht Treaty provided that measure the degree of convergence to be done by several indicators of macroeconomic performance, as follows: a) The size of the rate of inflation (consumer price index: HICP = Harmonized Index of Consumer Prices). Participants in monetary union must register an inflation rate that does not exceed by more than 1.5% average of the most powerful in the area of price stability, three Community countries. b) exchange rate. Rate of nominal exchange rate should not be changed at least two years before entering the third stage in the plan provided Dellors stage transition to a single currency. European Monetary System, established in 1979, was the center of the scripts or ECU, calculated based on a basket of currencies against which the allowance of a margin variation of + / - 2.25%. Following the crisis of 1992-93, has moved to what is called new European Monetary System, in which margins were admitted variations + / - 15%, which basically represent a flotation. In such a wide channel, any currency can be maintained without devaluation or revalorisations. It may be said that the admission of this new system, provided the unchanged parities, as formulated in the Treaty, is no longer current. Is important, however, exercise participation in a mechanism that "simulates" a cooperation within a zone and, especially, the importance of achieving stability is "de facto" courses. c) Long-term interest rates. Between inflation rates and interest rates there is a close connection, namely: - The nominal interest rate> inflation rate, to have a positive real interest - Real interest rate = nominal rate - inflation rate; Interest rates on short-term are, naturally, vacillating. Long-term interest rates (bonds, treasury bills etc.). Are those that express the degree of credibility about the fundamental economic conditions, inflation rates of evolution. They are a barometer of the evolution of anticipatory fundamental conditions in the economy. But, as the instrument of monetary policy are rather interest rates in the short term, expressing the situation and supply-demand effect on the currency. The Maastricht Treaty stipulated that in countries participating in monetary union,
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long-term interest rates to maintain in a difference of + / - 2% compared to average rates prevailing in the three countries with the best result on inflation. Differences about higher interest rates would express anticipation of evolutions constant savings and a shift of capital in accordance with such an evolution. Important is that capital investment is not speculative nature and not be held solely to benefit on account of differences of interest rates, but to follow an allocation according to criteria of profitability. d) The criterion is the tax under two forms: - Admissible size of government deficit and government budget should not exceed 3% of Gross Domestic Product, because any deficit must be covered and funded in a certain way. Financing can be made by the following: a) sale of government bonds - treasury bills - in the country and abroad, with an attractive interest rate to creditors, in competition with interest charged by banks, and guaranteeing their revenue budget. The effects of such methods of coverage are felt on several plans: banks will register a deficit of cash, which goes up the interest rates on interbank money market, the currency market will "relax" and pressure on rate will be reduced by reducing the cost estimates of those who take to the purchase of government bonds, to get to burdensome debt for the future and budget for future beneficiaries; b) cheap loans from central bank or transfer of "commitments" (expenditure) budget to the central bank, the situation in its total subordination to the government, can call on such a source of financing the deficit will cause a relaxation government policy both in the field of taxation, as well as the expansion of revenue, with possible inflationary consequences; c) budget without issuing coverage, which represents a source of inflation and an erosion of government debt. This method is applicable in all circumstances in which the central bank is subordinated to the government, contributing to the unhealthy practice of the policy. - Total public debt - internal and external, and local government. Deficits leading to an accumulated debt that will be a burden on the next generation, we will lead to the need for higher taxes, which will negatively influence investment and growth. If the debt exceeds a certain size, it will raise serious problems regarding the refund. Therefore, the Treaty of Maastricht established the permitted size of public debt not exceeding 60% of GDP.
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4. The evolution of European monetary integration

Transition to quasi-generalized flotation of currencies widely used, was necessary to establish a monetary system to support the European economic integration. Such monetary arrangements were as follows: - "Snake" Monetary - European Monetary System - The European Monetary System. Plan Dellors and the Maastricht Treaty have brought the content of gradual evolution toward a European monetary union and the conditions which must meet the participants at the monetary union. Plan Dellors established through three stages to achieve the transition to monetary union: - Stage I: 1 July 1990-1 January 1994: the full liberalization of capital circulation: was from 1 July 1990. Realignment of the parity bit to be common place and have a closer coordination of monetary policy. - Stage II: 1 January 1994-1 January 1999: it was a stage of transition to European Monetary System in the Monetary Union has stipulated the following: - Monetary policies, while continuing to be national, to be closely coordinated. - Waiving of realignment parities. - Create a central monetary institution to become, subsequently, the European Central Bank. This institution was created as the European Monetary Institute, based in Frankfurt. Central banks continued to operate under the National Bank. - Stage III: 1 January 1999: The Delors provide guidance to irrevocably fixed exchange rates and finally the replacement with a single currency. European Council in Madrid in December 1995 decided that: - Single currency be named EURO;
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- Nomination of the first states were to participate in the forthcoming monetary union to be done in early 1998, at the same time, European Central Bank is in operation; - Administration of participating countries, banks, financial institutions prepare for transition to stage III, 1 January 1999 to start the actual monetary union by the irrevocable fixing of parities, with the operation of the European Central Bank will issue the Euro.

European Central Bank European Central Bank (replaced the European Monetary Institute) - Eurofed system (ESCB-European System of Central Banks), is an institution independent from the governments participating in the MU, and from bodies, the decisions which it has focused only achieve its objectives as they were formulated by statute. Capital of the European central bank is 5 million Euros. This capital contribution made by the central banks of 11 countries and parts of shares subscribed by the central banks of some countries do not. Calculation of these contributions was made according to the GDP and population size and will be paid in full. Price stability is the main objective of the ECB, as it was established by statute, and is defined as an annual increase of the Harmonized Index of Consumer Prices (HICP) for the euro area of below 2% over the medium term (file: H: \ [Link]). Such a formulation does not exclude the oscillation of prices in the short term, but with a trend in employment stability provided. In mid 1998, were nominated which meet the conditions for participation in the forthcoming monetary union, taking into account both the degree of economic performance criteria specified, and the option on their participation or non participation in monetary union. Countries which were selected for monetary union are: Austria, Belgium, Finland, France, Germany, Italy, Ireland, Luxembourg, Netherlands, Spain, Portugal. Of 15 EU countries, four were not initially included on the list either because they wanted not to participate in monetary union by what is called opt-out (Denmark, Sweden, United Kingdom) or do not qualify as performance on the economy (Greece). From 1 January 2001, Greece entered the monetary union.

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Euro - the new currency of the European Union As decided by the European Council (Council Regulation (EC) No. 2866/98) and taking into account bilateral central rates under ERM (Exchange Rate Mechanism), 31 December 1998 have been irrevocably fixed parities currencies participating countries in relation to new currency EURO, EURO has replaced the ECU in relation to 1:1 (1 Euro = 1 ECU), based on the calculation of official exchange rate of ECU 31 December 1998. Reference rate against the Eurocalled EONIA (Euro Overnight Index Average) was a weighted average of transactions a panel of banks on the interbank transactions that were processed up at 6.00 pm Each bank has sent an average of lending rates. The conversion rates for the 11 currencies against the euro is as follows:

1 EURO = 40.3399 BEF 1 EUR = 1.95583 DEM 1 EURO = 166, ESP 386 1 EUR = 6.55957 FRF 1 EURO = 0, IEP 787,564 1 EURO = 1936, 26 ITL 1 EURO = 40.3399 LUF 1 EUR = 2.20371 NLG 1 EURO = 13.7603 ATS 1 EURO = 200.482 PTE 1 EUR = 5.94573 FIM These conversion rates remain unchanged and will be the only legally permissible rate for conversion between euro and national currencies, as well as for conversion between national currencies. On 1 January 1999, a new currency was launched, but not as an actual currency in the form of banknotes and coins divizionare - national currencies being placed in circulation yet - but as an expression of currency operations (book-keeping money) .
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The new currency is not calculated according to a basket, but a currency itself, which meets in the euro area, even in these three years, some features specific coins, such as: - New issues of government bonds and other securities on the financial market will take place only in Euros, and the financial market of the euro area has become a highly integrated all its components. - Money market, according to the European Central Bank statistics, recorded an increase in the volume of operations, which naturally help achieve the objectives of monetary policy in the monetary field. Area money market has become more "liquid" market is that banks which provide access to cash. Important is that the operations in this market has allowed reducing spread, the difference between bid and ask (the buying and selling), which is an extremely positive sign. - Between near sensitive to interest rates on cash loans of very short-term (overnight interest rate spreads) in the participating countries. - Banks and companies switch to using the Euro transactions between customers and their financial products in euros, payments, deposits, dual prices (in national currency and in Euros), consumers get used to the new currency, even if for now continue to use the national currency. Euro replaced after three years, respectively on 1 January 2002, national currencies. They were completely withdrawn from circulation within six months, and between January 1 and July 1 2002 and replaced by Euro notes and subdivisions thereof. All operations after this date, took place in Euro. Not all EU Member States have entered into UM. Therefore, once the transition to the third stage of MU have coexist more currency regimes, as follows: - The euro - which will share compared to U.S. dollars and other currencies against non (yen, Swiss Franc, Canadian Dollar, etc.).. - Each participating national currency to MU will parities fixed irrevocably, but against currencies outside the fluctuation will be via Euro. - The currencies of EU countries not participating in MU (Pound sterling, crowns Swedish and Danish) participate voluntarily but in the new exchange rate mechanism (NERM New Exchange Rate Mechanism or ERM II), which replaces the European Monetary System.
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The most important uses of the single currency are: a) Euro "inherits" from the previous - ECU - an important international financial market. Issuance of securities in Euros, made by non-residents of the area, represents about 20% of the total issuance of such securities on international financial market (compared to 49% in U.S. emissions). This place will reinforce that by taking the issue of new securities in Euros, and by replacing the previous options for securities issued in currencies of countries participating in the EU. b) Serve speech traded goods prices, first between member countries. Free circulation of goods within the internal market is boosted and the advantages that it offers participants unique: the disappearance rate risk and costs that accompany its management, transparency and comparability of prices on markets of countries participating. One can say without holding back, as the unique advantages potenteaza liberalized trade in goods and services and the integration of factors of production - labor and capital. Entering a date of 1 January 1999, and the TARGET payments and clearing between the euro area is likely to greatly facilitate the operations of intracommunity payments. Of course, this intra-Community trade is taking a date to remove all trade barriers between countries, the domestic trade. Therefore, the statistics reveals distinct extra-Community trade which he considers the real foreign trade area. Even in doing so, the EU being the largest trading power in the world and experiencing a degree of opening in 1998, 17%, owning about 20% of world exports, will provide new support its currency in goods and services sold on the plan Internationally, as the openings. Becomes in this way, the reference currency for international trade, EU imports and exports to / from the associated candidate countries, can now be invoiced in euros. Commercial operations and other areas, such as developing - ACP countries - will have a similar regime. Even a trade with the rest of the countries to the extent they need to pay in EURO European Union will call on the European currency. As a result, will take place, clearly, a certain place reasezare owned by widely used currency in international trade operations. We know that the dollar has 4 times the value of expressing the value of exports than U.S. exports. This is explained by the central role of the dollar in the international monetary system (currency
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reserves, full convertibilitate first euromoneda, etc.). The traditional role of the dollar in international commercial operations, as it consolidated during postwar period, not being used only in the U.S. foreign trade, but also in foreign trade of all states. The official uses of the currency are: a) the Euro has taken place and the national currencies in the international foreign exchange reserves, is installing it as the next U.S. dollars and after that, but some currencies such as the pound sterling, yen, Swiss franc, etc.. (about 19%, compared to about 58% dollar share). b) Given such important international positions, the Euro and serves as the anchor-currency standard for coins outside. 5. Pros and cons of forming economic and monetary union in Europe Economic and monetary union to be considered from a particular point of view, the most ambitious and most risky project of European construction is the result of a political decision based on a strong economic component. If only one of the two components (economic or political) should be the basis for creating its economic and monetary union would not have done any today only because of economic or in political arguments should not have been sufficient. From a political point of view, the formation of economic and monetary union is the cession of sovereignty and control over economic policy decisions of Member States. Moreover, the introduction and use of the single currency would entail a single economic management that would require the transfer of responsibilities and even the operation of a single political leadership. Economic, economic and monetary union does not provide sufficient reasons for its creation, primarily because the Community is not an optimal currency area. The status of optimal monetary area includes: - A high degree of openness of economies to intra-Community trade; - A high degree of cross-border mobility of capital and labor; - High flexibility of prices and wages;, - Be scale transfers where tax revenues are redistributed to areas in recession.
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Basically, Member of a group or joining another group can win each of possession of a common currency only when part of an optimal currency area, when their economic structures are similar and when there is no risk of shocks asymmetric affect only some of these countries. But as the economies of the Member States there are notable differences in levels of development, they will react differently to shocks from outside. Thus, for those Member States which are net exporter changing world price of a product will have an effect opposite to those recorded by countries that are located on the position of net importer. Similarly, consumers in some Member States to lend more, others less, and as such will receive a different interest rate fluctuations on international markets. Asymmetric shocks can generate failures and incompatibility from the perspective of business cycles, meaning that some Member States may stay in phase of growth, others on the decline or stagnation, so that a single monetary policy, optimal currency areas own, could not solve all the countries involved. Particularly, the Euro area, which is not at this time no one optimal currency area, Member States no longer have the opportunity to set their own interest rate or using the exchange rate as an instrument of economic policy. Moreover, none of the alternative adjustment mechanisms, such as migration, the level of wages, capital movements, political as scale, scale transfers as direct aid or not operating at optimum parameters in the Euro. Meanwhile, there are linguistic and cultural barriers related to labor mobility, which determines the variations of wages and unemployment. For these reasons, the European Union and is currently suboptimal monetary zone, which constitutes an impediment at this stage of integration. Despite the status of the area sub-optimal money, but there are a number of pros (and cons and of course) to constitute an economic and monetary union in Europe.

Arguments in favor of economic and monetary unification in the EU were:

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- Completing the single market, meaning that a single market needs a single currency; - Increasing the speed of transfer of money flow and eliminate conversion costs; - Reducing the risks related to trade and investment by eliminating fluctuation exchange rate; - Price transparency, and thereby better informing participants in transactions; - Monetary discipline in the sense that governments will no longer be able to use foreign currencies as instruments of economic policy; - Decrease in inflation because the discipline imposed on economies that form the Euro zone; - The merger of financial markets, which can lead to economies of scale; - increase efficiency and achieve improved economic growth rates high; - Strengthening the position of the European Union in the international monetary system; - To facilitate the achievement of political goal of creating;

Arguments against the formation of a monetary unification in the EU were: - Loss of control and power of decision on monetary issues; - flexibility loss, meaning that national governments will not take monetary policy decisions to allow their economies to protect the external shocks, to the detriment of other countries; - Relatively large differences in business cycles and living standards between Member States; - Danger of split in European Union countries inside and outside economic and monetary union; - Costs of materials that lie replacing national currencies with the single currency, the creation of institutional and legislative changes required by this approach.

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6. Romania's Integration in the European Monetary Union Romanian economy is moving ahead today in the right direction and the last results allow us to look at the future with more optimism. Pre-Accession Economic Program, adopted by the Government in October last year and its updating in 2002 means tools planning and implementation of policies necessary to transform the Romanian economy into a viable market economy able to cope with competitive pressure the EU. In 2001, Romania's economic growth reached 5.3%, while this development is and in future years. As regards the macroeconomic program for pre-order period 2003 -2006, the fundamental objectives of macroeconomic policy, as proposed by the current government, were set as follows:

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- Real growth and sustainable P.I.B. ; - Accelerate economic structural reform and accelerating the privatization process; - Creating a functioning market economy, consistent with the principles, rules, mechanisms, institutions and policies of the European Union to ensure that the conditions of accession of Romania; - And significant improvement in general standard of living of citizens of Romania. The main options, to achieve the objectives mentioned were: - Improving the structure of total demand, as a result of a dynamic high gross fixed capital formation, compared with that of final consumption; - Revive domestic production and in particular manufacturing, with an increased intake of added value, its effect will be felt in increased services; - Changing the structure of Romanian exports to products with higher degree of processing and higher value added; - Strengthen the disinflation process; - Moderate appreciation of the national currency, the regime controlled flotation, in relation to labor productivity growth, so as not to affect the external competitiveness of national production; - Promoting a policy of revenue to support the disinflation process, an evolution of those strictly related to their economic performance; - Improved utilization of labor resources, to increase the number of staff in terms of increasing the pace of labor productivity; - Improving financial stability and banking system; - Developing a business environment attractive and functional; - Increasing the rate of investment and attracting foreign capital; - Increasing the flow of foreign capital and international economic cooperation, underpinned by improving the legislative framework and definition of packages offers complete investment; - Improving the proportionality between the various prices in the economy, in terms of

25

reducing further the rate of inflation; - Progress in the structural reform, the financial discipline.

In conclusion, these objectives and strategies can be summarized in the following lines of action of the main economic policy: - Reducing inflation; - Stimulate the processes of saving and investment; - Increased production of goods and services; - Increasing domestic consumption; - Stimulate exports. The objectives of the target set for the period 2003 - 2006 led to the following developments the main macroeconomic indicators:

The programmed evolution of the macroeconomic indicators during 2003 2006 YEAR INDICATOR 2003 2004 2005 2006

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Gross Domestic Product (annual rate %) Industrial output (annual rate %) Agricultural production (annual rate %) Exports fob (annual rate%) Import cif (annual rate%) Inflation (% p.a.) Unemployment rate (% p.a.) Domestic demand (% annual rate) of that: Actual individual consumption households (rhythm Annual%) Collective consumption public administration (rhythm Annual%) Gross fixed capital formation (annual rate%)

+ 5,2

+ 5,5

+ 5,1

+ 5,0

+6,7

+5,3

+4,9

+5,0

+4,9

+4,8

+4,6

+3,4

+ 10,1 + 8,4 14 8,9 + 4,8

+ 9,2 + 7,6 9,0 8,4 + 5,1

+ 8,1 + 6,7 7,0 8,1 + 4,7

+ 7,5 + 6,3 4,0 7,5 + 4,6

+ 4,0

+ 3,8

+ 3,1

+ 3,2

+ 2,0

+ 1,0

+ 1,0

+ 1,5

+ 9,0

+ 11,0

+ 11,5

+ 9,5

27

Source: The Ministry of Finance on macroeconomic prospects during 2004 2006

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7. Advantages and disadvantages of integration of Romania in EMU

European integration, the national economy, implies the need for integration and monetary union, the single currency is only one of the future package of instruments to be used at the scale to ensure macroeconomic balance. From this perspective, a possible approach categories: advantages, disadvantages, opportunities, costs, on the integration of national economies in the euro area, could have the following points of reference: phenomenon-the long-term integration, European economic integration would have little meaning without the achievement of monetary integration and just because the economic relationships at Member State level, would give rise to implicit and sources of macroeconomic imbalances, which formed in shocks would not be able to prevent or absorbed in the absence of unification, at macrosistem a minimum package of policies, techniques, tools and measures, whose number will be always in strict dimensional depending on the magnitude and intensity of relationships of the real economy; costs-economic integration, as well as those of monetary integration, whether viewed from the perspective of the macroeconomic or microeconomic can be reduced through measures and policies to prepare the target media that tend to enter a new stage of integration, usually much rigorously, in terms of conditions and is also recommended that at the macroeconomic level, these management measures and policies be established correlation, for the purposes of obtaining a higher degree as neutralization or reduce costs and disadvantages by those corresponding opportunities and benefits; problematic in this respect may be referred to an actual real example for Romania, namely: -approximation in the context of the accession of (already known mechanisms, such as reduction to cancel tariff barriers to trade with each other Member States, increased European investments in Romania intensify economic cooperation between Romania and the United States and others) and trade relations economy in general, between Romania
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and Member States have a great opportunity to step up, at least from a theoretical point of view, the practical aspect, but even if, today, Romania is not yet member of the European Union economic exchanges, existing between Romania and the United States induce obligation Romanian participants to meet all the rigor required by Community legislation and valid throughout the European Union, in other words, the theoretical trend of development of economic relations between Romania and Member States are opposed to the reality of state practice, still insufficient to train Romanian commercial offer for the single market, just this discrepancy is associated with the primary objective of training policies for EU accession, on the perspective, the situation described has the following characteristics: the Nowadays one can say that is certainly an advantage for the entire national economy by generating, in advance and with the exercise of specific market conditions; -where macroeconomic managers of training programs for membership and the need to understand and target a bid for a perfect cooperation, this current exercise will give results that will be prerequisites for a good development of the Romanian economy in the Community; - Where there will be an optimum assimilation of European values of the Romanian business environment increasing the European market for products in Romania will be uncertain.

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BIBLIOGRAFY: 1. Appleyard, Dennis, Alfred Field, International Economics. Payments, Exchange Rates & Macropolicy. Richard Irwin 1995; 2. Baldwin, R, Wyplosz, C. The Economics of European Integration, 2003; 3. Miron, D, (coordonator), Economia Uniunii Europene, Ed. Luceafrul, Bucureti, 2000; 4. Moussis, N, Guide to European Policies, European Study Service, Belgium, 2003; 5. Silasi, G. Integrarea monetar european ntre teorie i politic, Ed. Orizonturi universitare, Timioara, 1998; 6. Vaubel, R, Monetary integration theory, London, 1988; 7. M. Brsan, Integrarea economica europeana, Edit. Carpatica, vol I, 1995. 8.V. Turliuc, V. Cocris, A. Boariu, O. Stoica, V. Danescu, D. Chirlesan, Moneda si Credit. 9. Prof. Univ. N. Dardac, Conf. Univ. dr. T. Vascu, Moneda si Credit. 10. Prof. dr. Maria Barsan, Integrare Economica Europeana. INTERNET [Link]/eurobirth [Link]/emi/press/htm_jcom.htm [Link]/press/pr980912_3.htm [Link] [Link] [Link]

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[Link] [Link] [Link] [Link] [Link]/reviste/1_2005/[Link] [Link]/fisiere/slide-uri/politica%[Link] [Link]/pozitii/2004/[Link] [Link]/Proiecte/Brosuri/2005/Uniunea%20economica%20si%20%[Link]

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