The Road to European Monetary Union

272 Pages·1999·23.595 MB·English

by  André Szász (auth.)

THE ROAD TO EUROPEAN MONETARY UNION
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The Road to European
Monetary Union
Andre Szasz
former Executil'e Director
Dutch Central Bank
First published in Great Britain 1999 by
MACMILLAN PRESS LTD
Houndmills, Basingstoke. Hampshire RG21 6XS and London
Companies and representatives throughout the world
A catalogue record for this book is available from the British Library.
ISBN 978-1-349-27874-9 ISBN 978-0-230-59947-5 (eBook)
DOT 10.1057/9780230599475
First published in the United States of America 1999 by
ST. MARTIN'S PRESS, INC.,
Scholarly and Reference Division.
175 Fifth Avenue, New York, N.Y. 10010
ISBN 978-0-312-21873-7
Library of Congress Cataloging-in-Publication Data
Snisz. Andre.
The road to European monetary union I Andre Szasz.
p. em.
Includes bibliographical references and index.
ISBN 978-0-312-21873-7
I. Monetary unions~European Union countries. 2. Monetary policy
-European Union countries. 3. European Monetary System
(Organization) 4. European Union countries~Economic integrution.
I. Title.
HG925.S93 1999
332.4'566'094~dc21 9~--40521
CIP
([) Andre Szasz 1999
All rights reserved. No reproduction, copy or transmission of this publication may he made
without written permission.
No paragraph of this publication may be reproduced. copied or transmitted save \\ ith
written permission or in accordance with the provisions of the Copyright. Designs and
Patents Act 1988, or under the terms of any licence permitting limited copying issued b)
the Copyright Licensing Agency. 90 Tottenham Court Road, London WI P 9HE.
Any person who does any unauthorised act in relation to this publication rna) be liable to
criminal prosecution and civil claims for damages.
The author has asserted his right to he identified as the author of this work in accordance
with the Copyright. Designs and Patents Act 1988.
This book is printed on paper suitable for recycling and made from fully managed and
sustained forest sources.
10 9 8 7 6 5 4
OX 07 06 05 04 03 02 0 I 00
Contents
Introduction XI
1 The Political Background to European Integration 1
1.1 The economic road 2
1.2 The impact of the Suez Crisis 2
1.3 Assessment 5
2 The Rome Treaty (1958) and the Barre Plans (1968-9) 7
2.1 Imbalances in the Treaty 7
2.2 CAP and a common currency 8
2.3 Economists and monetarists 9
2.4 The Barre plans 11
2.5 Assessment 12
3 Economic and Monetary Union:
The Hague Summit of 1969 15
3.1 Tensions in the international monetary system 16
3.2 Tensions within the European Community 20
3.3 Brandt's new Ostpolitik 25
3.4 Assessment 28
4 The Werner Report (1970) 30
4.1 Monetary Union 30
4.2 Economic Union 31
4.3 Political Union 32
4.4 First stage 33
4.5 Assessment 34
5 The Snake (1972-8) 36
5.1 The snake in the tunnel 36
5.2 Moment of truth 37
5.3 Snake and mini-snake 39
5.4 Once again French problems 41
5.5 Assessment 43
v
VI Contents
6 The European Monetary Cooperation Fund 46
6.1 Shift in purpose and timing 46
6.2 Controversies 47
6.3 Assessment 49
7 The Making of the European Monetary System (1978) 51
7.1 Transatlantic tensions 52
7.2 The exchange rate mechanism 52
7.3 The European Monetary Fund 54
7.4 Schmidt's problem and solution 55
7.5 Confronting the partners 56
7.6 Back to the snake 58
7.7 Schmidt and Giscard 60
7.8 Assessment 62
8 The Working of the European Monetary System
in the Period 1979-87 66
8.1 1979-83: Crisis 67
8.2 Basle-Nyborg 69
8.3 Assessment 74
9 Promoting the ECU 76
9.1 The Fund 77
9.2 Acceptance limits 78
9.3 Negotiations 80
9.4 Assessment 82
10 The Single European Act (1985-6) 85
10.1 Capital liberalisation 86
10.2 A 'monetary dimension' in the Treaty 89
I 0.3 The Luxemburg European Council 92
10.4 Assessment 95
11 French-German Tussle: Monetary Union
Revived (1987-8) 98
11.1 French dependence on German policies 98
11.2 Changes in technical arrangements 99
11.3 French-German Financial and Economic Council 100
Contents v11
11.4 French proposal for a European Central Bank 101
11.5 German reactions 103
11.6 The link with security and defence 106
11.7 Assessment I 07
12 The Delors Report 110
12.1 Composition and mandate of the Dclors Committee 110
12.2 The requirement of unanimity 112
12.3 The report's contents 115
12.4 Assessment 118
13 British Opposition 120
13.1 British reaction to the report 120
13.2 Thatcher's options 122
13.3 Assessment 127
14 The Madrid Summit (June 1989) and its Follow-up 130
14.1 Timing and substance 131
14.2 Long or short transitional stage 134
14.3 Assessment 135
15 German Unification (1989-90) 137
15.1 Exodus 137
15.2 German Monetary Union 139
15.3 Two sides of the same coin 141
15.4 Assessment 144
16 Monetary Union 147
16.1 Central Bank independence 147
16.2 French rearguard action 150
16.3 Assessment 152
17 Economic Union 154
17.1 Why budget constraints 155
17.2 Economic Government 156
17.3 Excessive deficits 158
17.4 Convergence criteria and the third stage 160
17.5 Assessment 162
VIII Contents
18 Ratification (1992-3) 165
18.1 Danish disaster 165
18.2 French miscalculation 167
18.3 British agony 168
18.4 German last comer 168
18.5 Assessment 170
19 Black September (1992) 172
19.1 The lira's devaluation 172
19.2 First steps to Black Wednesday 174
19.3 Crisis 177
19.4 Aftermath 180
19.5 The lessons of September 1992 182
19.6 Assessment 182
20 The Collapse of the Old EMS (1993) 185
20.1 Lost opportunities 185
20.2 Prelude to derailment 188
20.3 The July crisis 190
20.4 The crises in retrospect 192
20.5 Assessment 194
21 The Guilder: A Case Study of a Hard Currency Policy 196
21.1 Trailing the German mark 196
21.2 The last devaluations (1979 and 1983) 198
21.3 Interest rate controversies 201
21.4 The guilder and the crisis of 1992 204
21.5 German-Dutch bilateral agreement 205
21.6 Assessment 210
22 Why the Euro? 213
22.1 German motives 213
22.2 French motives 216
22.3 The decision-making process 219
22.4 Contradictions 222
22.5 Dilemmas 225
22.6 Conclusion 228
Contents IX
Notes 230
Bibliography 248
Index 254