The EU finance ministers have broadly agreed the rules and regulations which will apply to member states who join the single currency. Monetary Policy The European Central Bank (ECB) will take control of interest rates across the monetary union area. It will take over the main functions of the national central banks, which will remain in existence largely as arms of the ECB. The key decision making board of the ECB will be the governing council, comprising its executive board and central bank governors of participating states, Interest rate decisions will be based on economic conditions across all the participating states. Budget Policy This will remain the responsibility of the member state governments. But the Dublin EU summit last year agreed a growth and stability pact which sets limits in this area.

Under this, member states would be required to run an exchequer borrowing requirement of no greater than 3 per cent of GDP, with an average level close to balance or in surplus. Generally, breaching the rules involves a sanctions procedure, culminating in financial penalties.

The 3 per cent limit can be breached without incurring sanctions in exceptional circumstances, such as a deep recession where national output falls by 2 per cent or more in a year.