To deal with problems, such as persistent high employment, governments will no longer be able to juggle exchange rates to make their countries' goods and services more attractive. They will have to become more efficient and, many experts say, they will be forced into cooperating in areas such as taxation and social policy. Already they are considering highly controversial proposals to tax interest on savings accounts held by nonresidents, and to eliminate corporate tax loopholes. The introduction of the euro is officially the final phase of economic and monetary union, or EMU, which was called for by the Maastricht treaty on European Union. In effect, EMU is so far only a monetary union.
Economic union is likely to follow as governments establish a policy framework.
The existing national central banks, such as the powerful German Bundesbank, will continue to exist, in effect as branches of the European Central Bank, which recently established a base interest rate of 3 percent for the entire zone. Their chiefs will travel to Frankfurt twice a month to debate and decide policies. But the central bank's president, Wim Duisenberg, Europe's counterpart to the chairman of the U.S. Federal Reserve Board, Alan Greenspan, will bear ultimate responsibility for those decisions.