This article explains Germany's function and role in European monetary cooperation. It refutes two popular hypotheses in this context — (1) that Germany serves as a regional hegemon comparable to the role of the United States in the Bretton Woods system; and (2) that Germany is dominant in terms of influencing policies in a unidirectional sense. Instead it argues that Germany's position of monetary power is policy-based by virtue of its status as a strong currency country. This has been the basis for two crucial leadership functions Germany has provided in the European Monetary System (EMS), namely those of a standard-setter and broker. The article also describes the changing circumstances for the exercise of leadership that are associated with a move to a monetary union as envisioned in the Maastricht Treaty. As in the case of the EMS, the ultimate success of a future monetary union depends heavily on the emergence of leadership.
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