There has been more debate – academic and official – about Stage Two of EMU than about Stage Three. The recommendations of the Delors Report (1989) regarding the mandate and organization of the ESCB were widely endorsed, but its proposals regarding the transition to EMU were strongly criticized. Some critics questioned the need to require convergence before moving to Stage Three. Others questioned the wisdom of giving the ECB any role in the conduct of monetary policy during the transition to EMU.

The first two sections of this chapter examine those two issues and the debate about them. The remaining sections deal with three other issues: the use of the ECU before it becomes a currency in its own right, the need for “one last realignment” before exchange rates are irrevocably locked, and monetary cooperation between the ESCB countries and the remaining EC countries – those that cannot enter Stage Three initially, as well as those that may opt out.

This chapter does not ask how the EMS crises of 1992 and 1993 have affected the outlook for EMU or bear on the interpretation of the Maastricht Treaty. Those matters, and the crises themselves, are considered in Chapter 7.

The controversy over convergence

The processes and preconditions for starting Stage Three were described in Chapter 2. In 1996, certain convergence criteria will be used to identify the countries that are ready to enter Stage Three, decide whether it is “appropriate” to start that stage, and, if so, to set a date.