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European Union

The European Parliament in Brussels during British Prime Minister Tony Blair’s address, June 23, 2005. © YVES
HERMAN/REUTERS/CORBIS

policies. Because of its representative nature, the Parlia- second most important currency along with the U.S. dol-
ment most accurately reflects the ideals and opinions of its lar. While the U.S. dollar has become less important
people. because of world events such as stock market scandals and
The European Commission is an independent politi- terrorist attacks, the euro has become more widely sought
cal body meant to act upon the interests of the European after. The euro began circulation in January 2002, replac-
Union as a whole. The commission is made up of one per- ing the individual currencies being used at the time in
son from each nation. It is also the executive arm of the twelve nations. What is remarkable about the new cur-
European Union and follows through with the decisions rency is that it not only replaced the currencies of these
made by the council. In the event of censure by the Par- nations, but also replaced icons of national and cultural
liament, the entire body must resign. Censure requires a symbols. This contributed to the new “European iden-
two-thirds vote by the Parliament in order to be passed tity.” One of the other benefits was the ability to travel
and is an effective check on the balance of power within within member nations without having to exchange cur-
the European Union. rencies.
The judicial branch is known as the Court of Justice The process of bringing member nations on board
of the European Union. It meets in Luxembourg and is with the single currency was not easy or painless. The new
made up of one judge from each country serving an ini- currency requires economic discipline by reducing budget
tial term of six years with additional terms of three years. deficits, curbing inflation, curbing interest rates, and
The role of the Court of Justice is not only to make sure reducing public borrowing to below 60 percent of gross
the laws created are fair and just, but also to guarantee that
domestic product to ensure the stability of the new cur-
member nations fulfill their European Union obligations.
rency. In order to make this happen, the European Cen-
tral Bank was created in 1999. The bank set was ordered
MONETARY POLICY to set and maintain the value of the euro interest rates,
The primary strength of the European Union lies within and develop sound fiscal policy. One of the tenets of the
its strong currency known as the euro. It has become the fiscal policy is to maintain budget discipline in order to

284 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION