The basic message is that while we know a significant amount about the relative suitability of different countries for EMU, we know relatively little about whether all, some, or no countries would benefit economically from joining a single currency before the millennium. Rather than adding to this already extensive literature, this section of the paper will provide a brief overview of the existing evidence. The costs come from the loss of monetary independence, and largely depend upon the size and correlation of underlying disturbances and the availability of mechanisms other than the exchange rate for alleviating country-specific disturbances. The benefits include the gains from lower transactions costs, greater competition, and more integrated markets. There is a considerable amount of empirical work assessing the suitability EU members for joining EMU, looking at both the potential benefits and costs. First, which countries might benefit from entry into EMU before the millennium, and second, which exchange rate policies are best designed to move countries with individual national currencies to a currency union.
At the same time, many of the deadlines in the treaty are fast approaching, making this an opportune time to reconsider issues associated with the transition to EMU. Events since the signing of the treaty, however, in particular the exchange rate problems experienced by a number of countries in 19, have made the exchange rate path to EMU envisioned in the Maastricht treaty less tenable. By providing a specific path to European monetary union (EMU), the Maastricht treaty moved the discussion of a single European currency from the theoretical to the practical. While discussion of a single currency in western Europe was certainly not new even in official circles (the Werner report in 1970 also presented a path for moving to a single currency), none of the earlier plans had been agreed by the relevant national governments. The signing of the Treaty on European Union (the Maastricht treaty) on 7 February, 1992 marked an important shift in European monetary arrangements.