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Abstract

Beginning in 1978, the European Community embarked upon a process that would leave the member states 15 years later at a significantly higher level of economic integration. The establishment and institutional development of the European Monetary System would be perceived to be a success, leading to the Single European Act and the eventual adoption of many of those policies characteristic of a single internal market within the Community. This, in time, provided a base upon which an attempt at establishing economic and monetary union could be made. Although difficulties associated with a premature vision of the true nature of the European Monetary System would need to be described as a setback to the process, it is nevertheless clear from a broader perspective, and from the desire shown by other states to join the Community, that the economies of Western Europe are integrating.

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1. In some ways, the original contribution to optimum currency theory by McKinnon spoke most directly to the European case, where an optimum area is defined by the openness of countries and by the resulting constraints on the ability to adjust exchange rates as well as macroeconomic policy variables. See Ronald I. McKinnon , “Optimum Currency Areas,” American Economic Review, 53(4):717 (Sept. 1963).

2. For more on the institutional design, development, and economic results of the EMS, see Hugo Kaufmann and Stephen Overturf , “Progress within the European Monetary System,” in The State of the European Community, ed. Leon Hurwitz and Christian Lequesue (Boulder, CO: Lynne Rienner, 1991), pp. 183-205.

3. Three examples from a large literature include Jacques Melitz , “Monetary Discipline and Cooperation in the European Monetary System: A Synthesis,” in The European Monetary System, ed. Francesco Giavazzi , Stefano Micosi , and Marcus Miller (New York: Cambridge University Press, 1988); Francesco Giavazzi and Alberto Giovannini, “The Role of the Exchange-Rate Regime in a Disinflation: Empirical Evidence on the European Monetary System,” in ibid.; Susan M. Collins, “Inflation and the European Monetary System,” in ibid.

4. For reflection on this point, and much else dealing with these concerns, see John T. Woolley , “Policy Credibility and European Monetary Institutions,” in Euro-Politics, ed. Alberta M. Sbragia (Washington, DC: Brookings Institution, 1992).

5. Michael Calingaert , The 1992 Challenge from Europe: Development of the European Community's Internal Market (Washington, DC: National Planning Association, 1988), p. 66.

Wayne Sandholtz and John Zysman , “Recasting the European Bargain,” World Politics, 42:95-128 (Oct. 1989).

7. See also Robert O. Keohane and Stanley Hoffmann , “Institutional Change in Europe in the 1980s,” in Keohane and Hoffmann, New European Community, p. 11.

8. Cameron suggests that “the EMS, or something like it, represented a necessary precondition for the free flow of goods, services, and capital within the Community.” David R. Cameron , “The 1992 Initiative: Causes and Consequences,” in Euro-Politics, ed. Sbragia , pp. 47-48.

9. Committee for the Study of Economic and Monetary Union , Report on Economic and Monetary Union in the European Community (Luxembourg: Office of the Official Publications of the European Communities, 1989).

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10. Ibid., p. 14.

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11. A report, Directorate General for Economic and Financial Affairs , One Market, One Money (Belgium: Commission of the European Communities, 1990), was issued with the intention of serving as the equivalent of the Cecchini Report for EMU.

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12. On this point, see Horst Ungerer , “Political Aspects of European Monetary Integration” (Mimeo., based on a lecture at the European University Institute, Florence, 3 Nov. 1992), pp. 19-20. For the political dimension of economic integration in this area, see Ungerer's entire paper.

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13. Committee for the Study of Economic and Monetary Union , Report on Economic and Monetary Union, p. 15.

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14. As a group, it is estimated that the European Free Trade Association would increase the Community's revenues by 14 percent. See “Will More Be Merrier?” Economist, 17 Oct. 1992, p. 75.

The Economics of the Renewed Integration Movement

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