A monetary union is an arrangement where several countries have agreed to share a single currency amongst themselves. The European Economic and Monetary Union (EMU) consists of three stages coordinating economic policy, achieving economic convergence (that is, their economic cycles are broadly in step) and culminating with the adoption of the euro, the EU's single currency. All member states of the European Union are expected to participate in the EMU. The Copenhagen criteria is the current set of conditions of entry for states wanting to join the EU. It contains the requirements that need to be fulfilled and the time framework within which this must be done in order for a country to join the monetary union. An important element of this is the European Exchange Rate Mechanism ("ERM II"), in which candidate currencies demonstrate economic convergence by maintaining limited deviation from their target rate against the euro.
All member states, except Denmark and the United Kingdom, have committed themselves by treaty to join EMU. Sixteen member states of the European Union have entered the third stage and have adopted the euro as their currency. Denmark, Estonia, Latvia, and Lithuania are the current participants in the exchange rate mechanism. Of the pre-2004 members, the United Kingdom and Sweden have not joined ERM II and Denmark remains in ERM without proceeding to the third stage. The five remaining (post-2004) states have yet to achieve sufficient convergence to participate. These eleven EU members continue to use their own currencies.
- EMU is sometimes referred to as European Monetary Union, this is not correct.
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