The transition to monetary union in Europe, which began formally when Stage 2 started in January 1993, is now well over half
way to completion, according to the deadlines set in the Maastricht Treaty. The first decisions on Stage 3 are approaching fast, yet
the prospects for its commencement are still very unclear, and many important practical and policy issues are still in doubt. This
article provides an overview of the EMU debate, covering the latest developments on convergence (Section 1), the main institu
tional matters still to be resolved before Stage 3 begins (Section 2), the key problems awaiting policy-makers in Stage 3 (Section 3),
and finally the controversy about the economic rationale of EMU (Section 4). It concludes that the UK Government was wise to
defer a decision on whether to participate in Stage 3 until the implications became clearer, but that it would be unwise to abandon
the option, which it presently risks doing, by design or default.
Get full access to this article
View all access options for this article.
References
1.
Arrowsmith, J. (1996a), 'Economic and Monetary Union: economic, financial and legal aspects of the transition to a single European currency', in House of Commons, Treasury Committee (1996 ), see below, vol. II.
2.
Arrowsmith, J. (1996b), 'Pitfalls on the path to a single currency', EUI Working Paper RSC no. 96/21, European University Institute, Florence, May.
3.
Arrowsmith J. and Taylor, C.T. (1996), Unresolved Issues on the Way to the Single Currency , National Institute of Economic and Social Research Occasional Paper 49.
4.
Bank of England Act, 1946, Reprinted in The Bank of England Act, 1946 and the Charters of the Bank of England, Bank of England, undated.
5.
Bank of England (1996), 'Practical issues arising from the introduction of the Euro', Issue no. 2, Bank of England, 16 September.
6.
Barr, D. (1992), 'The demand for money in Europe: comment on Kremers and Lane', IMF Staff Papers, 39, September.
7.
Barrell, R. and Sefton, J. (1995), 'Output Gaps. Some Evidence from the UK, France and Germany', National Institute Economic Review, no. 151, February.
8.
Barrell, R., Morgan, J. and Pain, N. (1996), 'The impact of the Maastricht fiscal criteria on employment in Europe', a paper for the 'Project Link' meeting, New York, March 1996. Revised version of National Institute Discussion Paper no. 81, June 1995.
9.
Bayoumi, T. and Eichengreen, B. (1992), 'Shocking aspects of European Monetary Integration' , Centre for Economic Policy Research, Discussion Paper 643.
10.
Bishop, G. (1995), The EMI Report on the Changeover to a single Currency: Fundemanetally Flawed, Salomon Brothers International Limited, London, 23 November.
11.
Buiter, W., Corsetti, G. and Roubini, N. (1993), 'Excessive deficits: sense and nonsense in the treaty of Maastricht', Economic Policy, April.
12.
Commission of the European Communities (1990 ), 'One market, one money', European Economy , 44, October.
13.
Commission of the European Communities (1995 ), Europinion No. 5, Results of the Monthly Survey of European Opinion, July.
14.
Commission of the European Communities (1996 a), 'Report on convergence in the European Union in 1995', European Economy, Supplement A, no. 1, January.
15.
Commission of the European Communities (1996 b), 'The Community Economic Outlook: 1995-1997, European Economy, Supplement A, no. 5/6, May/June.
16.
Congdon, T. (1996), 'Could monetary union work without political union ?', in Davidson, I.D. (1996); see below.
17.
Corden, W.M. (1993), 'European Monetary Union: the intellectual prehistory' in A. Giovannini et al., eds., The Monetary Future of Europe, Centre for Economic Policy Research Discussion Paper, March.
18.
Cottarelli C. and Kourelis, A. (1994), 'Financial structure, bank lending rates and the transmission mechanism of monetary policy', IMF Staff Papers , vol. 41, no. 4, December.
19.
Council of the European Communities/ Commission of the European Communities (1992), Treaty on European Union.
20.
Crockett, A.D. (1994), 'The role of convergence in the process of EMU ', in A. Steinherr, ed., 30 Years of European Monetary Integration: From the Werner Plan to EMU, Longman.
21.
Davidson, I.D. (1996), European Monetary Union: the Kingsdoum Enquiry , Macmillan Press for Action Centre for Europe.
22.
Davies, G. (1996), Will a European recession kill the single currency ? , Goldman Sachs International EMU Briefing Issue no. 4, 18 January.
23.
Driver, R. and Wren-Lewis, S. (1996), 'European Monetary Union: asymmetric shocks and inertia', University of Exeter Discussion Paper in Economics, July.
24.
Easton, W.W. and Stephenson, M.J. (1990), 'The interest rate transmission mechanism in the United Kingdom and overseas', Bank of England Quarterly Bulletin, May.
25.
EMU City Working Group (1996), 'Preparing for EMU', British Bankers Association, Association for Payment Clearing Services, London Investment Banking Association, September.
26.
European Monetary Institute (1995), The Changeover to a Single Currency, November.
27.
European Monetary Institute (1996), Annual Report1995, April.
28.
Groupe plénier Hervé Hannoun (1996), 'Passage à la Monnaie Unique', AFB Diffusion , July.
29.
Hamaui, R. (1996), 'Why people fear the European single currency? a comparative analysis of public opinion', in European Monetary Union: the Problems of the Transition to a Single Currency, Banca Nazionale del Lavoro Quarterly Review, Special Issue, March.
30.
House of Commons, Treasury and Civil Service Select Committee (1993), The Role of the Bank of England, First Report, Vol. 1, Session 1993-4, HMSO, December.
31.
House of Commons, Treasury Committee (1996 ), The Prognosis for Stage Three of Economic and Monetary Union , 8th Report, vol. 1, session 1995-96, HMSO, July.
32.
House of Lords, Select Committee on the European Communities (1996), An EMU of 'Ins' and 'Outs', 11th Report, Session 1995-96, HMSO, June.
33.
Hughes Hallett, A.J. and Demertzis, M. (1996), 'Is there convergence in a two-speed Europe? evidence from the labour markets', draft in mimeo, March.
34.
Hughes Hallett A.J. and Ma, Y. (1996), 'Changing partners: the importance of co-ordinating fiscal and monetary policies within a monetary union', Manchester School of Economics and Social Studies, LXIV, 2, June.
35.
Issing, O. (1994), 'Monetary policy strategy in the EMU', in J. O de Beaufort Wijnholds et al., eds., A Framework for Monetary Stability, Kluwer Academic Publishers .
36.
Johnson, C. (1996), In With the Euro, Out With the Pound, Penguin.
37.
Kenen, P.B. (1995), Economic and Monetary Union in Europe: Moving Beyond Maastricht, Cambridge University Press.
38.
Kingsdown Enquiry. See Davidson, I.D. (1996).
39.
Kremers, J.M. and Lane, T.D. (1990), 'Economic and monetary integration and the aggregate demand for money in the EMS', IMF Staff Papers, 37, December.
40.
Krugman, P.R. (1990), 'Policy problems of a monetary union', reprinted in Krugman, ed., Currencies and Crises, MIT Press.
41.
Lamfalussy, A. (1996), 'The operation of exchange rate policy in Stage 3 of EMU', Address to the Association for the Monetary Union of Europe 1996 Annual Conference, London , 19 June.
42.
Lawson, N. (1992), The View from No. 11, Bantam Press.
43.
Meade, J. and M. Weale (1995), 'Monetary union and the assignment problem', Scandinavian Journal o f Economics, vol. 97, pp. 201-22.
44.
Melliss, C.L. (1993), 'Tradable and non-tradable prices in the United Kingdom and the European Community', Bank of England Quarterly Bulletin, February.
45.
Miles, D. (1994), 'Fixed and floating-rate finance in the United Kingdom', Bank of England Quarterly Bulletin, February.
46.
Monticelli, C. and Strauss-Kahn, M.-O. (1993), 'European integration and the demand for broad money', Manchester School of Economics and Social Studies, LXI, 4, December.
47.
Montecelli, C. and Viñals, J. (1993),' European monetary policy in Stage Three: what are the issues?' in A. Giovannini et al., eds., The Monetary Future of Europe, London : Centre for Economic Policy Research, March.
48.
Moore, N.E.A. (1996), 'The UK changeover to decimal currency in 1971 and possible lessons for the introduction of a single European currency', in House of Commons, Treasury Committee (1996 ), see above, vol. II.
49.
Moutot, P. (1995), 'Preparing for monetary union: the view of the EMI', International Conference Group conference paper, London, 3 July.
50.
Oecd (1995), 'Effects of ageing populations on government budgets', OECD Economic Outlook , 57, June.
51.
Oecd (1996), OECD Economic Outlook , 59, June.
52.
Portes, R. (1996), 'Implementing EMU', AEA Papers and Proceedings, May.
53.
Roll Committee (1993), Independent and Accountable: A New Mandate for the Bank of England, Report of an Independent Panel chaired by Eric Roll, Centre for Economic Policy Research, October.
54.
Taylor, C.T. (1995), EMU 2000? Prospects for European Monetary Union , The Royal Institute of International Affairs.
55.
Taylor, C.T. (1996), 'The separation of monetary and fiscal policy in Stage Three of EMU', paper for a workshop on 'The Institutional Aspects of EMU', Centre for European Law, Kings College , London, 26 January. (Forthcoming by Kluwer International Publishers, Autumn.)
56.
Thygesen, N. (1996), 'Should budgetary policies be coordinated further in economic and monetary union - and is that feasible?', in European Monetary Union: The Problems of the Transition to a Single Currency , Banca Nazionale Quarterly Review, Special Issue, March.
57.
Treaty on European Union. See Council of the European Communities, 1992.
58.
Turner, P. and Van't dack, J. (1993), Measuring International Price and Cost Competitiveness, Bank for International Settlements Economic Papers, 39, November.
