Monetary Policy in the Euro Area and the First Year of the Eurosystem

  • Frank Smets


A long process of economic and political integration in Europe has preceded the introduction of a single currency, the Euro, in eleven of the fifteen European Union members on 4th January 1999. Nevertheless, until as late as a couple of years ago, serious doubts remained about whether the whole Maastricht process would end up in tears. As discussed in Corsetti and Pesenti (1999), the most surprising fact ex post is that, in spite of the setback experienced in 1992 and 1993 during the ERM crisis, the creation of a single currency in eleven of the fifteen EU countries has largely occurred according to the time-table and modalities agreed upon in December 1991 in Maastricht. Against this background and the fact that the European Central Bank as an independent institution came into being only on 1st June 1998 and thus had about six months to finish the preparations for the establishment of monetary union, it is equally remarkable that the start of the single monetary policy has occurred without any major glitches. Contingency plans designed to deal with possible market anomalies, ranging from the possibility to exclude unprepared agents from market operations to the introduction of special procedures for monetary policy, remained unused. The new payments system, TARGET, was from the start a success and performed its functions with high technical reliability.


Interest Rate Monetary Policy Central Bank Asset Price Euro Area 
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Copyright information

© Springer Science+Business Media New York 2000

Authors and Affiliations

  • Frank Smets
    • 1
  1. 1.European Central BankGermany

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