EMU at 1

Economic and monetary union (EMU) among eleven of the fifteen members of the European Union began on January 1, 1999. The national currencies of the eleven were abolished and replaced with a new single currency, the euro. Responsibility for monetary policy shifted from the national central banks to the European Central Bank. Many commentators in the United States thought EMU would never come about or, if it did, that it would not last long. In this article Mark Wynne reviews EMU's first year. He looks at how the economy of the euro area has fared under the single monetary policy, examines how successful the ECB has been in fulfilling its mandate for price stability, and considers the prospects for the future. Despite the dramatic decline in the euro against the dollar over the course of 1999, the first year of EMU must be judged a success. While it is still too early to say whether in the long run the euro will be a strong currency like the Deutsche mark, the institutional design of EMU and the performance of those institutitions over the first year are promising.