Shortly before Ireland joined what was then the EEC back in 1973, the process of economic and monetary union in Europe had already begun.

Separate studies carried out by experts led by Luxembourg’s Prime Minister Pierre Werner in 1970 and then President of the European Commission, Jacques Delors, in 1989 showed that economic integration would benefit both EU businesses through increased trade and consumers by providing them with more choice as well as cheaper, better goods and services.

Economic integration took a huge step forward when the European Monetary System (EMS) became a reality in 1979, preventing major exchange fluctuations between EU currencies and in Ireland’s case, ending our link with British sterling.

Monetary union followed with the introduction of the Euro currency in 11 Member States, including Ireland, on January 1, 1999 after almost a decade of preparation.

At first the Euro only existed in ‘virtual’ form but on January 1, 2002 Euro banknotes and coins were introduced and old currencies including the Irish pound phased out.

The European Central Bank (ECB), established in 1998, is responsible for monetary policy within the ‘Eurozone’ or 'Euro Area' which is what the 17 member states (Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, the Netherlands, Austria, Portugal, Finland, Greece, Slovenia, Cyprus, Malta, Slovakia and Estonia).

The ECB is also part of the European System of Central Banks (ESCB), which includes the central banks of all 27 EU Member States and works to ensure economic stability throughout Europe.

The EU’s broad economic policy is to responsibly stimulate steady growth and create more jobs. However, due to the global economic crisis the medium term goal is to simply stabilise the economy.

The European Commission’s Europe 2020 strategy sets out a realistic path for Europe's future social market economy. It’s designed to transform the EU into a smart, sustainable and inclusive economy delivering high levels of employment, productivity and social cohesion.

To keep Europe 2020 on track following the economic crisis the EU is now taking unprecedented measures to restore stability to financial markets and ensure Europe is protected from future financial turmoil.

The EU acted swiftly when Europe was caught up in the centre of the economic downturn that first began to cause turmoil on international financial markets in 2007.

By September 2008 the world was witnessing a full-blown financial crisis with governments forced to rescue major banks and mortgage lenders with massive cash injections both in the US and Europe.

The European Economic Recovery Plan (EERP) was presented by the European Commission in November 2008 to try and restore economic confidence in Europe and as the crisis continued Member States had to adjust their budgets to cope with the new, difficult circumstances.

However, after the Greek economy floundered in spring 2010 and had to be financially assisted by Euro Area Member States and the International Monetary Fund (IMF) it became apparent that further actions were needed to help countries suffering extreme financial circumstances.

One of the actions was launched in May 2010 when the European Financial Stabilisation Mechanism (EFSM) was adopted by the finance ministers of the European Union at an Ecofin meeting of the Council of the European Union.

The EFSM allows any Member State suffering exceptional financial difficulties beyond its control to apply for assistance in the form of a loan and it’s part of a series of recently introduced measures designed to preserve the financial stability of Europe’s economic and monetary union in light of the global downturn.

The measures also include the European Financial Stability Facility (EFSF), which can provide temporary financial assistance to Euro Area Member States that are in difficulty.

Both the EFSF and the ESFM will remain in place until June, 2013, but at another Ecofin meeting in December 2010, EU finance ministers discussed a proposal from the European Commission for a permanent mechanism to assist countries in crisis.

The ministers agreed to create the European Stability Mechanism (ESM) and the decision was sent to the European Parliament, the European Commission and the European Central Bank for discussion.

As creating the ESM will involve a slight amendment of the Lisbon Treaty it will need to be rubber stamped by all 27 Member States but it’s hoped approval will be granted in time for it to be up and running by 2013 when the current mechanisms are due to expire.

The European Central Bank also responded quickly to the crisis by reducing interest rates to a record low of one per cent to try and stimulate lending while tougher controls and supervision of the financial markets have also been introduced.

The new European Systemic Risk Board, which was officially established in January 2011, assesses possible threats to European financial stability and issues risk alerts so preventative action can be taken.

European Supervisory Authorities will be able to intervene in financial emergencies and the European Securities and Markets Authority will have more power to supervise credit rating agencies in the EU.

Regular stress tests are now being carried out on the banking sector and systems of levies and taxes on financial institutions have been introduced. New rules will in future force banks to defer bonuses and limit cash payouts to employees to discourage excessive risk taking.

A European Semester will also take place every year in March to help member states prepare their national budgets within the limits of agreed EU economic policies.

EU citizens directly affected by the crisis have not been forgotten, including many of the Irish workers who have lost their jobs. An annual cash injection of €500 million has been made available through the European Globalisation Adjustment Fund to help redundant workers find new jobs as quickly as possible.

Tougher monitoring of the Stability and Growth Pact to ensure Member States keep within agreed budgetary limits and more intensive budgetary surveillance will help anticipate future economic problems so that corrective measures can be taken to prevent them developing into full blown crises.

Ireland found itself to be particularly vulnerable to the fallout of the collapse of banking systems in the US. Careless lending and overvaluation of assets, particularly property, by large financial institutions across the Atlantic was mirrored both here and all over Europe.

In Ireland the property bubble had been inflating at an alarming rate for almost a decade making a burst inevitable. Irish banks lent huge amounts to property developers, much of it recklessly, leaving Ireland’s banking sector particularly exposed to a property crash.

Property values halved within months of the global crisis and as unemployment grew, demand for homes plummeted. Developers were left with virtually worthless empty properties and no way to pay back their massive loans.

At the same time Irish banks were left struggling to pay back money they’d borrowed themselves from foreign banks and the global banking crisis was making it difficult for them to raise funds.

In September 2008 the Irish Government took steps to try and prevent the banking system from collapsing by guaranteeing all deposits so investors wouldn’t withdraw their funds from Irish banks.

The National Asset Management Agency (NAMA) had already been set up to buy bad property debt from the banks at a reduced rate to give them enough capital to continue operating. NAMA plans to sell on the properties when the market value increases.

However, the Government had to borrow from international investors through guaranteed bonds to raise money for NAMA and with the country in recession funds were also needed to pay for services like health, education and welfare as tax revenues had plummeted.

International investors could see the Irish economy was in trouble and began to demand high interest rates on Government bonds. Meanwhile, it was also becoming clear that more needed to done to save Irish banks, some of which were in much worse condition than originally thought.

Irish banks were having to borrow heavily from the European Central Bank to keep operating and concern was growing on international financial markets that they wouldn’t be able to pay back the debts owed to foreign banks.

In turn, these foreign banks were now coming under increasing pressure from their creditors. Ireland’s banking crisis was no longer just domestic, it was a European problem.

Europe was already dealing with an economic crisis in Greece, where reckless public spending and failure to implement financial reforms had left the country unable to pay for its basic services.

Following a request by Greece, the Eurogroup, together with the ECB and IMF, agreed to give the country financial stability support of up to €110 billion.

The global crisis has put the euro currency under huge pressure with a number of Member States as well as Ireland and Greece facing economic uncertainty. And because this has the potential to affect all of Europe it’s important that the EU family of nations acts in solidarity to assist each other in times of difficulty. 

On 12 January 2011,  the European Commission adopted the Annual Growth Survey (AGS) which marked the beginning of the first cycle of coordination of the Member States' macro-economic, budgetary and structural reform policies, known as the "European semester".

The annual growth survey was the first step in a new system to help national governments more closely coordinate their responses to the EU's main economic challenges.

It is part of the new 'European semester', an annual six-month cycle during which governments benefit from the input of their peers at EU-level as they formulate their budgetary and economic policies. Working together on economic policy from the get-go will make it easier for EU countries to pursue shared targets and address common concerns.

The survey identifies 10 priorities EU countries should focus on to boost the economy and raise employment in line with the EU’s stability and growth pact and its new strategy for growth and jobs, Europe 2020. These include getting the unemployed back into work, reforming pension systems, reigning in public debt and promoting the full use of Europe's integrated economy.

Next steps for the European semester:

March – EU governments agree on economic priorities, based on the survey.

See press release on the Ecofin meeting of 15 March.

April – EU governments submit the following year’s draft budget strategies for evaluation by the Commission.

June and July – Council of EU ministers (which represents the EU governments) issues country-specific advice in light of the evaluation and joins the European Council in providing policy advice before countries finalise their budgets as normal through their national parliaments.

An EU-wide survey has found that 77% of Europeans think stronger coordination of economic and fiscal policies among member countries would help fight the economic crisis.