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Europe's financial crisis cannot be blamed on the Euro, Harold James contends in this probing exploration of the whys, whens, whos, and what-ifs of European monetary union. The current crisis goes deeper, to a series of problems that were debated but not resolved at the time of the Euro's invention. Since the 1960s, Europeans had been looking for a way to address two conundrums simultaneously: the dollar's privileged position in the international monetary system, and Germany's persistent current account surpluses in Europe. The Euro was created under a politically independent central bank to meet the primary goal of price stability. But while the monetary side of union was clearly conceived, other prerequisites of stability were beyond the reach of technocratic central bankers. Issues such as fiscal rules and Europe-wide banking supervision and regulation were thoroughly discussed during planning in the late 1980s and 1990s, but remained in the hands of member states. That omission proved to be a cause of crisis decades later. Here is an account that helps readers understand the European monetary crisis in depth, by tracing behind-the-scenes negotiations using an array of sources unavailable until now, notably from the European Community's Committee of Central Bank Governors and the Delors Committee of 1988-89, which set out the plan for how Europe could reach its goal of monetary union. As this foundational study makes clear, it was the constant friction between politicians and technocrats that shaped the Euro. And, Euro or no Euro, this clash will continue into the future.

The purpose of this article is to provide a political economy rationale that helps explain why some non-central European economies, featuring highly idiosyncratic disturbances and apparently low inflation bias inefficiencies, seem so eager to enter the European Monetary Union (EMU). The main message from the paper is that because these economies normally display a high degree of domestic political uncertainty, the "economic costs" arising from the decision to surrender monetary policy may in fact be less severe than the "political costs" of opting out of EMU and then possibly facing undesired inflation upsurges in the future. ; O objetivo deste artigo é sugerir um argumento de economia política que ajude a explicar porque alguns países periféricos da Europa, que apresentam choques econômicos altamente idiossincráticos, e que conseguiram controlar o problema do viés inflacionário recentemente, apresentam elevado desejo de ingressar na União Monetária Européia. A principal mensagem do artigo é que, devido ao elevado grau de incerteza e polaridade política presentes nestas economias, os "custos econômicos" de se delegar hoje a política monetária a um agente externo, podem se mostrar menores que os "custos políticos" de não adesão caso um governo com preferências inflacionárias mais amenas venha a vencer as eleições futuras.

General introduction -- General introduction -- One: Currency Competition -- I. The theory of currency competition -- II. The history of currency competition -- III. The history of monetary thought on currency competition -- IV. The current debate: The return to gold and the liberalization of banking -- Two: Monetary Union -- to Part Two. Which monetary integration? -- V. The European Monetary System -- VI. Is the adjustable peg a viable option? -- VII. Freely flexible exchange rates or a common currency? -- VIII. Exchange controls for ever? -- IX. Towards a better European Monetary System -- Appendix to Bibliographical Note (Lawrence H. White) -- The authors -- Index of names.

Hopkin, B. ; Reddaway, B.: Heading for breakdown. - S. 239-243. Holtham, G.: The Maastricht conception of EMU is obsolete. - S. 244-248. Palmer, J.: Wanted: A compelling vision. - S. 249-252. Radice, G.: The case for a single currency. - S. 252-256. Wolf, M.: Why European integration cannot be built on EMU. - S. 256-260

Monetary unions of the past had a better chance of success if economic policies of the participating states were in harmony. Example: The Scandinavian Monetary Union in contrast to the Latin Monetary Union. 0 Since harmony of economic policies could not be maintained under political stress (in the First World War), even the Scandinavian Union failed. .1 0 The only cases where monetary unions have survived up toQiow are those of general political, economic, and monetary unification: Switzerland, Italy and Germany. In monetary matters, the centralizing of decisions has been a minimum requirement for the success of a union. 0 No historical monetary union has brought about political unification. It has always been the other way round.

This book explores the scope and limits of macroeconomic policy in a monetary union. The focus is on pure policies, policy mixes, and policy coordination. The leading protagonists are the union central bank, national governments, and national trade unions. Special emphasis is put on wage shocks and wage restraint. This book develops a series of basic, intermediate, and advanced models. The monetary union is an open economy with high capital mobility. The exchange rate between the monetary union and the rest of the world is floating. The world interest rate can be exogenous or endogenous. The union countries may differ in money demand, consumption, imports, openness, or size. A striking feature is the numerical estimation of policy multipliers. A lot of diagrams serve to illustrate the subject in hand

In the decade since its creation in 1999, the European Economic and Monetary Union (EMU) has experienced surprisingly large and persistent inflation differentials across member states causing substantial shifts in relative price levels. At the same time, member countries exhibited distinct non-synchronized output fluctuations, giving rise to a pattern of 'rotating slumps' (a term coined by Olivier Blanchard). This paper presents a stylized theoretical model of a monetary union which demonstrates how inflation differentials and relative output movements interact dynamically. A number of implications are derived from the model. In particular, national fiscal policies are shown to have an important role in containing internal macroeconomic disparities in a monetary union. An optimal fiscal policy rule is derived from the model for that purpose.

This paper discusses possible links between monetary arrangements in particular monetary union and economic growth. It is stressed that growth depends ultimately on how the real economy works: there is no monetary magic that can conjure up growth. But monetary policy can contribute to conditions for sustainable growth by securing and maintaining price stability; monetary union might extend this. It might also deepen the single market. The elimination of nominal exchange rate movement among members of the union removes some sources of shock but also some ways of adjusting to shocks. This underlines the importance of other adjustment mechanism especially supply-side flexibility, which is crucial for growth in any event.

Establishing a single currency will launch the EU on a journey into the unknown. Thus while it is widely accepted that the fall-out from this decision will be far-reaching, little consensus exists on the impact on particular policy arenas. This article explores some of the main implications of monetary union for Social Europe-national systems of welfare pro vision and employment regulation. It is argued that efforts by virtually all the member states to meet the Maastricht criteria for joining the single currency club are impacting negatively on Social Europe. Moreover, with the member states signing a deflation-oriented Stability Pact, this cold climate threatens to spill over into the actual operation of the new Euro- zone. Thus the road to monetary union paved by Europe's political elite spells bad news for already beleaguered welfare and employment systems. At the same time, the article argues that a different form of monetary union is necessary to create more robust macroeco nomic foundations to Social Europe. At present, it is suggested that a big coordination deficit has emerged inside the European economy, causing an inhospitable environ ment for the social dimension in the absence of a single currency. Thus retreating to national mechanisms for economic management is rejected as an alternative project to the Maastricht plan for monetary union. Finally, the article investigates the viability of various reform paths to make the new Euro-zone more socially friendly.