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From Common Market to Emu: a Historical Perspective of European Economic and Monetary Integration


  • Philip Arestis

    (The Jerome Levy Economics Institute)

  • Kevin McCauley

    (The Jerome Levy Economics Institute)

  • Malcolm Sawyer

    (The Jerome Levy Economics Institute)


This paper traces the history and the institutional background to the establishment of the Economic and Monetary Union in the EU. It argues that since the establishment of the European Economic Community (EEC) in the late 1950s, attempts at monetary integration and ultimately monetary union, have tended to assume importance only as a result of financial crisis and becoming a vague objective as soon as the crisis recedes. In recent years, however, this search has assumed greater urgency for a number of reasons explored in the paper. Economic Union, on the other hand, has followed a smoother transition. Economic integration was used after the Second World War to ralise political goals, chiefly to anchor West Germany within Western European alliance. Since that time the economies of member states have slowly integrated. The economic environmment which existed in the 1950s is a far cry from the integrated European Community of today. In the 1950s, European currencies were not comnvertible and domestic trade was highly protected. Intra-European trade was based on bilateral clearing arrangements institutionalised by the European Payments Union. Today EU currencies are fully convertible. Capital controls, intra-EU tariffs and quotas have been eliminated, and the single market has been completed. The path which monetary union followed has gone through a number of stages. The Werner Plan of the early 1970s which set the goal of economic and monertary union by the end of the decade was only partially implemented. Its failure can be put down to unfavourable international economic conditions and poor institutional structures. In the early 1980s, a new monetary iniatitive was launched, the European Monetary System (EMS) which was condemned to failure by many. However, it struggled on through its initial phase until it was replaced by the current EURO arrangements. Each process should be interpreted as a building block of monetary union which ultimately culminated in the Maastricht Treaty that laid out a precise path and timetable for economic and monetary union.

Suggested Citation

  • Philip Arestis & Kevin McCauley & Malcolm Sawyer, 1999. "From Common Market to Emu: a Historical Perspective of European Economic and Monetary Integration," Macroeconomics 9903013, EconWPA.
  • Handle: RePEc:wpa:wuwpma:9903013
    Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 41; figures: included

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    References listed on IDEAS

    1. Dominick Salvatore, 1996. "The European monetary system: Crisis and future," Open Economies Review, Springer, vol. 7(1), pages 601-623, March.
    2. MacDonald, Ronald & Taylor, Mark P, 1991. "Exchange Rates, Policy Convergence, and the European Monetary System," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 553-558, August.
    3. Kruse, D. C., 1980. "Monetary Integration in Western Europe," Elsevier Monographs, Elsevier, edition 1, number 9780408106665 edited by DuchĂȘne, François.
    4. Fratianni, Michele & von Hagen, Juergen, 1990. "The European Monetary System ten years after," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 173-241, January.
    5. Michael W. Klein, 1998. "European Monetary Union," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 3-12.
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    Cited by:

    1. Robert L. Hetzel, 2002. "German monetary history in the second half of the twentieth century: from the deutsche mark to the euro," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 29-64.
    2. Dutta, M., 2000. "The euro revolution and the European Union: monetary and economic cooperation in the Asia-Pacific region," Journal of Asian Economics, Elsevier, vol. 11(1), pages 65-88.
    3. Patricia S. Pollard, 2003. "A look inside two central banks: the European Central Bank and the Federal Reserve," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 11-30.

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    JEL classification:

    • E - Macroeconomics and Monetary Economics


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