Chapter 20 Economic and Monetary Union

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Chapter 20 Economic and Monetary Union

• Cini (ed.) European Union Politics, 2nd edition
• OUP Online Teaching Resources

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Structure of the Lecture

• What is EMU?
• From the Hague to Maastricht (1969-1991)
• From Treaty to Reality (1992-2002)
• Explaining EMU
• Participating countries in the eurozone
• Criticisms of EMU

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What is EMU?

• The Component parts of EMU
• Monetary policy the European Central Bank (ECB)
  control money supply, credit conditions
  inflation, set a interest rate
• Eurozone or euro area, ECB (previously, the
  European System of Central Banks, ESCB), euro
  group / the ECOFIN Council
• Monetarists Vs Economists regarding how to obtain
  EMU

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What is EMU?

• Positive Negative integration
• For example, a relatively well-developed monetary
  union, but a much less developed economic union
• Various stages of integration from a free trade
  area (FTA) to a full political union

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From Hague to Maastricht (1969-1991)

• Hague Summit in 1969
• Exploring a possible path to EMU
• 1970 Werner Plan three stages to EMU
  institutional bodies
• Substantial differences among member states, and
  international economic and monetary environments
  in 1970s

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From Hague to Maastricht (1969-1991)

• Re-launch of EMU in the late-1980s
• Various developments such as the snake the
  European Monetary System (EMS) exchange rate
  mechanism (ERM) European currency unit (ECU)
• The Single European Act (SEA) the Delors Report
• The Maastricht Treaty
• Convergence criteria

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From Treaty to Reality (1992-2002)

• Ratification Problems
• The Danish referendum the result of the French
  referendum
• A turbulence period in the ERM (British pound and
  Italian lira)
• The Birth of the Stability and Growth
• Stability and Growth Pact (SGP)
• Problems of meeting the rules and objectives of
  the SGP (ex Germany)

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From Treaty to Reality (1992-2002)

• Joining the euro area
• France Germany as the lead countries on EMU
• 11 countries (Denmark, Sweden the UK / Greece)
• Managing EMU difficulties with the SGP
• The excessive deficit procedure (EDP)
• Cases of France Germany and the ECJs ruling
  difficulties with the implementation of the SGP

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Explaining EMU

• EMU from an Economics perspective
• Does it make economic sense to create an EMU in
  the EU? (ex an Optimum Currency Area theory)
• Focus on central banks and the importance of
  credibility
• EMU from an a political Science perspective
• A neo-functionalist explanation spillover,
  thus a natural step
• An intergovernmental explanation the bargaining
  behaviour of the largest member states such as
  German hegemony(?)

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Criticisms of EMU

• Countries opposing EMU
• Benefits of EMU such as the elimination of
  transactions costs, strong monetary policies,
  etc.
• Economic slowdown in the euro area
• Debates on the UK

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Criticisms of EMU

• Criticism on the institutional design of EMU
• The issues of legitimacy and accountability (ex
  the ECB)
• The ECB mandate
• Does the ECB pursue policies for the EU as a
  whole?
• Is economic government necessary?