Economics – Globalisation | e-Consult
Globalisation (1 questions)
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As outlined above, a monetary union involves a single currency and a common monetary policy, while a full economic union extends this to include the harmonization of economic policies across member states, essentially creating a single market with free movement of factors of production. The key difference is the scope of policy integration.
The implications for national sovereignty are significant. A monetary union requires countries to cede control over their monetary policy, while a full economic union requires a much greater degree of policy coordination and potentially the transfer of legislative powers to a supranational authority. This can be politically contentious.
The following table summarises the key differences:
| Feature | Monetary Union | Full Economic Union |
| Currency | Single, shared currency | Single, shared currency |
| Monetary Policy | Single monetary policy controlled by a central bank | Single monetary policy controlled by a central bank |
| Fiscal Policy | Limited fiscal policy options; often constrained by rules (e.g., Stability and Growth Pact) | Harmonized fiscal policies; potential for greater fiscal coordination |
| Trade Policy | Independent trade policies with non-member countries | Harmonized trade policies with non-member countries |
| Factor Mobility | Limited factor mobility | Free movement of factors of production (capital, labour, goods) |
| National Sovereignty | Significant loss of monetary sovereignty; limited loss of other sovereignty | Significant loss of national sovereignty |