In and Out of Monetary Unions: Lessons From, and Risks For the EMU. An Alternative Approach to Monetary Unions

Barry Eichengren (2008) maintains that the European Monetary Union (EMU) is an unprecedented experiment. Indeed, its very distinguishing feature is to be a monetary union without being a political one. Thus, the EMU experience is dominated by the overwhelming role of the member states. In particular, France and Germany have guided every step in the European economic and monetary integration process. We have full evidence of this. To limit ourselves to a few examples: the so-called Werner plan was launched in 1970 by Willy Brandt, Chancellor of the German Federal Republic.2 Two years later, Germany, safeguarding its industry’s interests, imposed the so-called European Monetary Snake on the other EEC member states.3 In 1979, German and French economic interests pushed Helmut Schmidt and Giscard d’Estaing towards a new Exchange Rate Mechanism (ERM) binding all EEC currencies to prevent any competitiveness gains against the Deutschmark and to protect French farmers’ interests.4 The third stage of monetary union witnessed an unexpected and impressive speeding up in Madrid in 1995, thanks to France and Germany. Finally, in November 2003 the ECOFIN, i.e. the member states, decided — in opposition to the Commission — to hold the Stability Growth Pact (SGP) sanctions and the Excessive Deficit Procedure in abeyance against France and Germany whose fiscal deficits breached the ceiling of 3 per cent of GDP twice.