EMU: the Political Implications

Monetary union has twice been a live issue in the politics of the European Community — first, in the late sixties and early seventies, when the Werner Group proposed a phased plan for the achievement of monetary union by stages, and when member governments rashly committed themselves to full-scale monetary union by 1980; and, second, in the late seventies, when Mr Roy Jenkin’s Florence speech ‘relaunching’ the concept in October 1977 was followed not more than a year later by the decision to set up the European Monetary System. Both in the first, ‘Werner’, phase and in the second, ‘Jenkins’, phase, the most enthusiastic advocates of monetary union clearly appreciated that it had immense political and institutional implications. The final report of the Werner Group explicitly said that in the final stage there would have to be a ‘centre of decision for economic policy’ and a ‘Community system for the central banks’ (Commission of the European Communities, 1970, pp. 12–13). Jenkins (1978a) did not go quite as far as this, but in his Florence speech he said that monetary union ‘would imply a major new authority to manage the exchange rate, external reserves and the main lines of internal monetary policy’; and in a speech to the European Parliament a few weeks later, he declared that in a monetary union ‘two of what are generally regarded as the more important functions of a modern government — control over the exchange rate and control over the money supply — would be exercised by a central Community institution instead of by governments’ (Jenkins, 1978b).