The creation of the European and Monetary Union (EMU) has been one of the most determined and successful projects carried out by the European Union (EU) – and it is still in progress since eleven EU-countries are, following the Maastricht treaty, legally required to join the Eurozone as soon as they meet the convergence criteria. The reasons for the creation of EMU have been widely discussed among scholars; some focus on the request for political integration that would resulted from an EMU, some claim that the EMU was established to promote growth and investment. The assignment will hence “discuss how the creation of EMU was both an economic and politically driven process”. Chapter 1 outlines events and agreements which indirectly led to the EMU. Chapter 2 assesses the Delors Report and the Stability and Growth Pact (SGP) which affect EMU directly . Chapter 3 concludes by analysing the mentioned 30-year process leading to the EMU and gives a brief outlook. This approach has been chosen because it is essential to study the historical events leading to the Delors Report and finally the Treaty on European Union (TEU) in order to analyse the creation of EMU.
Table of Contents
INTRODUCTION
1. PRECEDING EVENTS LEADING TO EMU
2. THE DELORS REPORT AND THE STABILITY AND GROWTH PACT
3. CONCLUSION
Objectives and Topics
This essay explores the historical development of the European and Monetary Union (EMU), arguing that while economic justifications were prominent, the creation of the EMU was fundamentally a politically driven process aimed at European integration. The research investigates the evolution from early exchange rate regimes to the establishment of the single currency and the subsequent governance framework.
- The role of the Werner Report and the 'snake in the tunnel' as predecessors to monetary integration.
- The influence of the Delors Report in shaping the three-stage process toward the Euro.
- The political necessity and implementation of the Stability and Growth Pact (SGP).
- The tension between French 'monetarist' and German 'economist' approaches to convergence.
- The impact of institutional policy-learning on European governance.
Excerpt from the Book
1. Preceding events leading to EMU
The idea of fixed exchange rates is not new. The world’s main currencies were already fixed in terms of gold with the Gold Standard lasting from 1870 to the 1930s, and in line with the Bretton Woods system from 1944 to the early 1970s. When the Bretton Woods system began to falter in the late 1960s, European Community (EC) governments started thinking about a regional exchange rate regime. They feared that exchange rate instability disrupts trade, even until now, there has been little empirical evidence for this (Leddin and Walsh 2003). In addition, they knew that instability in the foreign exchange markets made it very complicated to run the Common Agricultural Policy, whose target was to establish a common price for agricultural products throughout the Community. Some European political élites also viewed monetary integration and a single currency as a way to bring together nation-states in order to warrant political stability and cooperation across the EU (McNamara 2005).
The common approach towards a monetary integration and a single currency led to the Werner Report in 1969. It was the first programme for an EMU written out by a study group of high-ranking EC and national officials, and chaired by Pierre Werner, the Prime Minister of Luxembourg. The Plan had originally been drawn up at the EC’s summit in the Hague by Willy Brandt, the German Chancellor, and Georges Pompidou, the French president, starting a enduring series of Franco-German efforts towards monetary integration (ibid). While the report gave a timetable on EMU, it was rather indistinct on its institutional set-up (Werner Report 1970). The Plan was approved in 1971 by the EC’s national political leaders, but it was never realized due to a lack of political will and poor economic circumstances resulting mainly from the collapse of the Bretton Woods system in 1971 and the oil crisis in 1973.
Summary of Chapters
INTRODUCTION: The introduction outlines the persistence of the EMU project despite its challenges and sets the essay's objective to examine the interplay between economic and political motivations for its creation.
1. PRECEDING EVENTS LEADING TO EMU: This chapter reviews early attempts at monetary coordination from the 1960s through the 1990s, highlighting the transition from the Werner Report to the European Monetary System (EMS).
2. THE DELORS REPORT AND THE STABILITY AND GROWTH PACT: This section details the formalization of the EMU through the Delors Committee and the subsequent political necessity of the Stability and Growth Pact to maintain fiscal discipline.
3. CONCLUSION: The final chapter synthesizes the findings, asserting that political integration remained the primary driver behind the EMU and discusses the future challenges of fiscal and economic harmonization.
Keywords
EMU, European Union, Monetary Integration, Delors Report, Stability and Growth Pact, Eurozone, Maastricht Treaty, Economic Policy, Political Integration, Exchange Rate, Convergence Criteria, European Central Bank, Franco-German Relations, Fiscal Harmonization.
Frequently Asked Questions
What is the primary focus of this essay?
The essay discusses the historical process of creating the European and Monetary Union (EMU), specifically examining how both economic and political factors influenced its development.
What are the central themes of the work?
The core themes include the evolution of exchange rate mechanisms, the impact of the Delors Report, the role of central bank cooperation, and the political drivers behind European economic integration.
What is the author's central research question?
The author seeks to address how the creation of the EMU functioned simultaneously as an economic project and as a politically driven process.
Which methodology does the study employ?
The work utilizes a historical policy analysis, tracing the evolution of agreements and institutional shifts within the European Community from the 1960s to the mid-2000s.
What content is covered in the main body?
The main body examines historical milestones like the Werner Report, the EMS, the Delors Report, the Maastricht Treaty, and the implementation and later reform of the Stability and Growth Pact.
Which keywords best characterize this research?
Key concepts include the EMU, political integration, monetary policy, convergence criteria, and the institutional cooperation between Germany and France.
How did the Delors Committee influence the EMU's creation?
The Committee, chaired by Jacques Delors, was instrumental in proposing a structured three-stage process toward monetary union, which provided the blueprint for the eventual Maastricht Treaty.
Why is the Stability and Growth Pact considered politically significant?
The Pact was created to enforce fiscal discipline among member states, yet the author notes that its flexible enforcement often highlights the political priority of maintaining the EMU's cohesion over strict rule-following.
- Quote paper
- Ramona Kraft (Author), 2006, The creation of the European Monetary Union (EMU), Munich, GRIN Verlag, https://www.grin.com/document/71937
