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This chapter introduces economic and monetary union (EMU), describingthe key components of EMU and what happens when countries join. EMU was the result of decades of collaboration and learning, divided here into three periods: 1969–91, from the agreement to creation to its inclusion in the Treaty on European Union (TEU); 1992–2002, from having the plans for EMU to the irrevocable fixing of exchange rates; and 2002 onwards, with EMU established and euro banknotes and coins circulating in member states. The chapter reviews various theoretical explanations, both economic and political, for the creation of EMU and considers some criticisms of EMU. The chapter discusses how EMU has fared under the global financial crisis, the sovereign debt crisis, and the COVID-19 pandemic. These crises highlighted various imperfections in the design of EMU and provided opportunities for further development. This chapter discusses changes made since 2009 to address those flaws and what may be yet to come.

This chapter explores how the EU ended a long period of constitutional change by agreeing the Treaty of Lisbon and used it to face new challenges of financial crisis, Brexit, and Covid-19—the latter events leading to thoughts that further treaty change might be needed. The process started with the 2002–03 Convention on the Future of Europe leadin to the Constitutional Treaty of 2004 and in October 2007 produced the Treaty of Lisbon which eventually entered into force on 1 December 2009. Its implementation was complicated by the eurozone crisis, resulting in extra-treaty arrangements and another treaty amendment. Although the official appetite for treaty reform all but evaporated in the 2010s, the UK’s June 2016 vote to quit the EU raised the hopes for further changes. The end of the 2010s and into the 2020s saw Brexit being negotiated within the terms of the Treaty of European Union the EU’s treaty agreeing measures to deal with the Covid-19 pandemic. Calls for treaty revision continued but active steps to re-negotiate the consolidated treaties have not yet begun.

Since 1999, a subset of EU member states—known collectively as the euro area—has delegated exclusive competence for monetary policy to the European Central Bank (ECB), while giving limited powers to the European Commission, ECOFIN, and the Eurogroup in other areas of economic policy. The euro crisis provided the first major test of the Economic and Monetary Union (EMU), as a sovereign debt crisis spread between member states and threatened to tear the single currency apart. The ECB and two new institutions—the European Stability Mechanism and Euro Summit—helped to keep the euro area together but at significant economic and political cost. EU institutions were better prepared for the initial economic consequences of the COVID-19 pandemic, but the crisis still produced important institutional changes. The COVID-19 recovery fund Next Generation EU gives the Commission and Council a major new role in economic policy, albeit a temporary one for now. The EMU illustrates three key dimensions of EU institutional politics: the tension between intergovernmental versus supranational institutions, leaders versus followers, and legitimacy versus contestation. It also reveals the explanatory power of new institutionalism among other theoretical perspectives.