The Road to European Monetary Union: A Political and Economic History

This book explains the political background, and describes the decision-making leading to European Economic and Monetary Union (EMU). As a former central banker who participated in the process for three decades, Andre Szasz is uniquely placed to add practical insights to his theoretical and historical research. Political rather than economic considerations were decisive in establishing EMU. France resented German monetary dominance and insisted on a form of decision-making in which it could exert influence. Germany complied. It needed French support at an early stage when trying to normalise relations with the Eastern bloc, and later - when Chancellor Helmut Kohl forced German unification. Located in the centre of Europe, and very much aware of recent history, Germany wished to secure stability by establishing Political Union. Meeting French demands to establish Monetary Union was a condition that had to be fulfilled first. Thus the issues involved are issues of power, though these are often couched in technical terms. Cover......Page 1 Contents......Page 6 Introduction......Page 12 1 The Political Background to European Integration......Page 16 1.2 The impact of the Suez Crisis......Page 17 1.3 Assessment......Page 20 2.1 Imbalances in the Treaty......Page 22 2.2 CAP and a common currency......Page 23 2.3 Economists and monetarists......Page 24 2.4 The Barre plans......Page 26 2.5 Assessment......Page 27 3 Economic and Monetary Union: The Hague Summit of 1969......Page 30 3.1 Tensions in the international monetary system......Page 31 3.2 Tensions within the European Community......Page 35 3.3 Brandt's new Ostpolitik......Page 40 3.4 Assessment......Page 43 4.1 Monetary Union......Page 45 4.2 Economic Union......Page 46 4.3 Political Union......Page 47 4.4 First stage......Page 48 4.5 Assessment......Page 49 5.1 The snake in the tunnel......Page 51 5.2 Moment of truth......Page 52 5.3 Snake and mini-snake......Page 54 5.4 Once again French problems......Page 56 5.5 Assessment......Page 58 6.1 Shift in purpose and timing......Page 61 6.2 Controversies......Page 62 6.3 Assessment......Page 64 7 The Making of the European Monetary System (1978)......Page 66 7.2 The exchange rate mechanism......Page 67 7.3 The European Monetary Fund......Page 69 7.4 Schmidt's problem and solution......Page 70 7.5 Confronting the partners......Page 71 7.6 Back to the snake......Page 73 7.7 Schmidt and Giscard......Page 75 7.8 Assessment......Page 77 8 The Working of the European Monetary Systemin the Period 1979–87......Page 81 8.1 1979–83: Crisis......Page 82 8.2 Basle-Nyborg......Page 84 8.3 Assessment......Page 89 9 Promoting the ECU......Page 91 9.1 The Fund......Page 92 9.2 Acceptance limits......Page 93 9.3 Negotiations......Page 95 9.4 Assessment......Page 97 10 The Single European Act (1985–6)......Page 100 10.1 Capital liberalisation......Page 101 10.2 A 'monetary dimension' in the Treaty......Page 104 10.3 The Luxemburg European Council......Page 107 10.4 Assessment......Page 110 11.1 French dependence on German policies......Page 113 11.2 Changes in technical arrangements......Page 114 11.3 French–German Financial and Economic Council......Page 115 11.4 French proposal for a European Central Bank......Page 116 11.5 German reactions......Page 118 11.6 The link with security and defence......Page 121 11.7 Assessment......Page 122 12.1 Composition and mandate of the Delors Committee......Page 125 12.2 The requirement of unanimity......Page 127 12.3 The report's contents......Page 130 12.4 Assessment......Page 133 13.1 British reaction to the report......Page 135 13.2 Thatcher's options......Page 137 13.3 Assessment......Page 142 14 The Madrid Summit (June 1989) and its Follow-up......Page 145 14.1 Timing and substance......Page 146 14.2 Long or short transitional stage......Page 149 14.3 Assessment......Page 150 15.1 Exodus......Page 152 15.2 German Monetary Union......Page 154 15.3 Two sides of the same coin......Page 156 15.4 Assessment......Page 159 16.1 Central Bank independence......Page 162 16.2 French rearguard action......Page 165 16.3 Assessment......Page 167 17 Economic Union......Page 169 17.1 Why budget constraints......Page 170 17.2 Economic Government......Page 171 17.3 Excessive deficits......Page 173 17.4 Convergence criteria and the third stage......Page 175 17.5 Assessment......Page 177 18.1 Danish disaster......Page 180 18.2 French miscalculation......Page 182 18.4 German last comer......Page 183 18.5 Assessment......Page 185 19.1 The lira's devaluation......Page 187 19.2 First steps to Black Wednesday......Page 189 19.3 Crisis......Page 192 19.4 Aftermath......Page 195 19.6 Assessment......Page 197 20.1 Lost opportunities......Page 200 20.2 Prelude to derailment......Page 203 20.3 The July crisis......Page 205 20.4 The crises in retrospect......Page 207 20.5 Assessment......Page 209 21.1 Trailing the German mark......Page 211 21.2 The last devaluations (1979 and 1983)......Page 213 21.3 Interest rate controversies......Page 216 21.4 The guilder and the crisis of 1992......Page 219 21.5 German–Dutch bilateral agreement......Page 220 22.6 Conclusion......Page 243 22.1 German motives......Page 228 22.2 French motives......Page 231 22.3 The decision-making process......Page 234 22.4 Contradictions......Page 237 22.5 Dilemmas......Page 240 Notes......Page 245 Bibliography......Page 263 Index......Page 269 This book explains the political background and describes the decision-making leading to European Monetary Union, as seen by a former central banker who participated in the process during more than two decades. Political rather than economic considerations were decisive in establishing EMU. French-German relations in particular form a thread that runs through the book, notably French efforts to replace German monetary domination by a form of decision-making France can influence. Thus, the issues involved are issues of power, though often presented in technical terms of economics. André Szász. Includes Bibliographical References (p. 248-253) And Index.