LONDON: By formally opening the European Central Bank in the first week of June, the European Union crossed the Rubicon into Economic and Monetary Union. The single currency itself – the euro – will be launched on January 1, 1999. These are major events, since there is no precedent for 11 independent and sovereign countries combining to create a new international currency with a single monetary policy and single monetary authority.
There is also a growing realisation that more hangs on EMU than the success or failure of a single monetary policy. For we can now see that the future EU expansion, indeed, of the European Union itself is riding on the success of the single currency.
If the single currency prospers, the EU will be strengthened and the process of European integration will receive a large new political impulse. If the single currency were to encounter serious economic and political difficulties, this fact would dominate all the political energies of the participating countries of Euro-land. And if, by chance, there were to be a breakdown of the single currency, we can be sure in advance that one of the consequences would be that all other strategic choices would be placed on hold.
Now the most important strategic choice on the EU agenda, after Economic and Monetary Union, is enlargement to central and eastern Europe. But it is beginning to look likely, perhaps inevitable, that the process of enlargement could be held hostage to the success of the programme for Economic and Monetary Union.