UPSC Exam Preparation: This Day in History – Feb 07

7 February 1992

Maastricht Treaty


What happened?

The Maastricht Treaty was signed on 7 February 1992, which paved the way for the formation of the Euro currency.

Background

  • This treaty is formally called the Treaty on European Union.
  • It was signed by the members of the European Community on 7 February 1992 at Maastricht, Netherlands. The European Community, alternatively known as the European Communities, was formed by the union of three organizations the European Coal and Steel Community, the European Economic Community and the European Atomic Energy Community.
  • The Maastricht Treaty was drafted by the European Council and it came into effect from 1 November 1993 onwards, when the European Union was formally established.
  • This treaty led to the Euro currency and it also created the pillar structure of the European Union (EU).
  • It also greatly expanded cooperation among European countries.
  • Initially, 12 countries signed the treaty – Belgium, France, Denmark, Netherlands, Ireland, Italy, Greece, Germany, Spain, Luxembourg, Portugal and the United Kingdom.
  • This treaty established the European Central Bank and the European System of Central Banks.
  • The central bank’s main goal was to maintain price stability, that is, to safeguard the value of the Euro currency. This was the result of decades of close cooperation among the countries of Europe in economic and commercial domains.
  • The idea for a single currency across Europe was mooted in the 1960s by the European Commission first, but at that time, political and economic landscape were not suitable for such a radical idea.
  • This treaty established three stages for the EU:
    • Stage 1: July 1st 1990 – December 31st 1993: free movement of capital between members.
    • Stage 2: January 1st 1994 – December 31st 1998: enhanced economic policy alignment and cooperation between national central banks between member states.
    • Stage 3: January 1st 1999 – today: gradual introduction of the Euro along with a single monetary policy.
  • The treaty also laid down the conditions that countries should satisfy in order to join the EU. This is called the Maastricht criteria or the convergence criteria. This was laid down to ensure price stability when new countries join the union. The condition was that countries should be stable in the areas of inflation, interest rates, exchange rates and the levels of public debt.
  • As per the treaty, member states had to have sound fiscal policies, debts to be limited to 60% of the GDP, and the annual deficits to be less than 3% of the GDP.
  • The treaty also led to the change in the name of the European Economic Community to the European Community. This was done to give a wider policy base and to extend cooperation from solely economic to military, foreign policy, criminal justice and judicial cooperation.
  • The treaty also founded the European Committee of the Regions.
  • Today there are 28 member states in the EU encompassing more than 510 million citizens.
  • The Euro, which was introduced in 1999, is used in 19 countries.
  • The euro is the second most traded currency in the world after the American dollar.
Also on this day

1908: Birth of Manmath Nath Gupta, revolutionary writer and member of the Hindustan Republican Association. 1974: Grenada achieves independence from the UK.

See previous ‘This Day in History’ here.

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