Introduction to Finance

special drawing rights (SDRs) 
reserve assets created by the IMF 
and consisting of a basket of 
currencies that could be used to 
make international payments
fl exible exchange rates 
system in 
which currency exchange rates are 
determined by supply and demand
European Union (EU) 
organization established to promote 
trade and economic development 
among European countries

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C H A PT E R 6 International Finance and Trade
In late 1991, members of the European Community met in Maastricht, Netherlands, to 
draft a treaty. The resulting 
Treaty on European Union
, referred to as the 
Maastricht Treaty
, 
was signed in 1992 by the following 12 members: Belgium, Denmark, France, Germany, 
Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, and the United Kingdom. 
The 
Maastricht Treaty 
created the European Union and provided for the economic con-
vergence, fi xing of member country exchange rates, and planned introduction of the euro 
as the common currency. Austria, Finland, and Sweden joined the EU in 1995, bringing 
the membership, then, to 15 countries. Ten additional countries (Cyprus, Czech Republic, 
Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia) joined the EU 
in 2004. Bulgaria and Romania were added in 2007, and Croatia became a member in 2013, 
bringing the total then to 28 EU member states. However, people in the United Kingdom 
voted in June 2016 to leave the EU causing concern about the EU’s future economic and 
fi nancial viability. 
Eurozone Members 
The 
European Monetary Union (EMU)
 
began as a 12-member subset of the 1995 15-member 
EU. Technically, by the end of 1998, 11 countries had met the economic and fi nancial require-
ments to convert to the euro. Greece was able to qualify in 2000 making it the twelfth member. 
EU members Denmark, Sweden, and the United Kingdom chose not to join the EMU. By 
ratifying the Maastricht Treaty, the EMU agreed to have overall monetary policy set by the 
European Central Bank (ECB) 
and adopted the euro as its common currency. It is common 
practice today to refer to the subset of EU members that have adopted the euro as their com-
mon currency as