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The Birth and Failure of the EMU Project

The Birth and Failure of the EMU Project Enrico Colombatto0 1. An introduction to the economics and politics of the Euro Since its very inception, it was clear to most that the creation of a European Monetary Union could be feasible only if at least one of the following requirements could be met: (a) The common currency to be adopted -- the Euro -- should have been a source of net benefits (lower transaction costs). For this to be unquestionably true, a necessary condition was the presence of a European optimum currency area. (b) The Euro had to be perceived and appreciated as a credible substitute for the existing European currencies; that is, the very features of the Euro should have made it more desirable than any other currency circulating as legal tender in the member countries. (c) Monetary and economic matters were not a primary issue. Rather, public opinion had to believe that the Monetary Union would be an important step towards other goals -- say, of a political nature. The literature has made it clear that the requirement mentioned sub (a) is met only if a very limited number of countries join the Union. The future EMU members, on the other hand, are far http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal des Économistes et des Études Humaines de Gruyter

The Birth and Failure of the EMU Project

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Publisher
de Gruyter
Copyright
Copyright © 1998 by the
ISSN
2194-5799
eISSN
2153-1552
DOI
10.1515/jeeh-1998-2-303
Publisher site
See Article on Publisher Site

Abstract

Enrico Colombatto0 1. An introduction to the economics and politics of the Euro Since its very inception, it was clear to most that the creation of a European Monetary Union could be feasible only if at least one of the following requirements could be met: (a) The common currency to be adopted -- the Euro -- should have been a source of net benefits (lower transaction costs). For this to be unquestionably true, a necessary condition was the presence of a European optimum currency area. (b) The Euro had to be perceived and appreciated as a credible substitute for the existing European currencies; that is, the very features of the Euro should have made it more desirable than any other currency circulating as legal tender in the member countries. (c) Monetary and economic matters were not a primary issue. Rather, public opinion had to believe that the Monetary Union would be an important step towards other goals -- say, of a political nature. The literature has made it clear that the requirement mentioned sub (a) is met only if a very limited number of countries join the Union. The future EMU members, on the other hand, are far

Journal

Journal des Économistes et des Études Humaines – de Gruyter

Published: Jun 1, 1998

References

  • Roubini Political and economic determinants of budget deficits in the industrial democracies pp
    Sachs
  • Colombatto The Birth and Failure of the EMU Project References Baldwin The costs and benefits of Eastern enlargement : the impact on the EU and central Europe April pp
    Francois