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The European Economic and Monetary Union (EMU) represents a unique experience in history. The Stability and Growth Pact (SGP) and the monetary policy strategy, which form the macroeconomic policy framework of the EMU, create new economic problems required to be analyzed.
By the start of the EMU on 1 January 1999, eleven European Union (EU) countries launched a common currency, the euro. Greece joined the euro area in January 2001. The euro notes and coins replaced the national currencies on 1 January 2002, while each country started to withdraw national currency notes and coins from circulation. The national currencies of the participating countries were completely replaced by the euro at the end of February 2002. On 1 January 2007, Slovenia joined the EMU. Participation countries irrevocably fixed the exchange rates of their currencies. They also adopted a common monetary policy, which is conducted by the European Central Bank (ECB). The primary objective of the ECB was defined by the Maastricht Treaty of 1992 as maintenance of price stability. In order to realize such an objective, the Governing Council of the ECB announced the main elements of its stability-oriented monetary policy strategy in October 1998. The ECB has conducted the monetary policy in the EMU since the start of the EMU in 1999.
Despite the fact that there is no common fiscal policy in the EU, national fiscal policies are coordinated at a fiscal framework in the EMU. This framework has been gradually developed. The Treaty of Maastricht set the convergence criteria, which also contain fiscal rules, for joining the EMU. The SGP, which was established by the...