EMU And The Ghosts Of Germany’s Past

LONDON: Chancellor Helmut Kohl has said that the economic and monetary union of Europe agreed in the Maastricht treaty is "a question of war and peace in the 21st century." Despite coming from the lips of a German leader and being delivered in Belgium -- the most war-torn country of western Europe -- the significance of these words were soon lost in the deluge of economic forecasts and monetary statistics which dominate discussion of European Monetary Union (EMU).

Even EMU opponents -- including myself -- concentrate on the economic dangers posed by monetary union. Tough budgetary criteria and deflationary policies imposed by the Maastricht treaty are blamed for aggravating Europe’s present slump, exacerbating unemployment, and threatening social stability. Moreover, they damage the fragile economies of the EU’s trading partners to the east. And there are clear dangers to the cohesion of western Europe from the likelihood that the EU will be split into two rival currency zones -- with 6 or 7 countries clustered around Germany and France belonging to EMU, while Britain, Denmark, Italy, Spain, Sweden and other economies remain outside.

Further ahead, EMU will become a huge obstacle to the transition countries seeking membership in the EU itself. Not only will they find it difficult to meet the convergence criteria (mandated low inflation and debt levels) fixed at Maastricht -- if they do join EMU they will find it hard to raise living standards to western levels, being forced to accept monetary and exchange rate policies designed primarily to stabilize prices in Germany and France.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.


Log in

  1. Patrick Kovarik/Getty Images

    The Summit of Climate Hopes

    Presidents, prime ministers, and policymakers gather in Paris today for the One Planet Summit. But with no senior US representative attending, is the 2015 Paris climate agreement still viable?

  2. Trump greets his supporters The Washington Post/Getty Images

    Populist Plutocracy and the Future of America

    • In the first year of his presidency, Donald Trump has consistently sold out the blue-collar, socially conservative whites who brought him to power, while pursuing policies to enrich his fellow plutocrats. 

    • Sooner or later, Trump's core supporters will wake up to this fact, so it is worth asking how far he might go to keep them on his side.
  3. Agents are bidding on at the auction of Leonardo da Vinci's 'Salvator Mundi' Eduardo Munoz Alvarez/Getty Images

    The Man Who Didn’t Save the World

    A Saudi prince has been revealed to be the buyer of Leonardo da Vinci's "Salvator Mundi," for which he spent $450.3 million. Had he given the money to the poor, as the subject of the painting instructed another rich man, he could have restored eyesight to nine million people, or enabled 13 million families to grow 50% more food.

  4.  An inside view of the 'AknRobotics' Anadolu Agency/Getty Images

    Two Myths About Automation

    While many people believe that technological progress and job destruction are accelerating dramatically, there is no evidence of either trend. In reality, total factor productivity, the best summary measure of the pace of technical change, has been stagnating since 2005 in the US and across the advanced-country world.

  5. A student shows a combo pictures of three dictators, Austrian born Hitler, Castro and Stalin with Viktor Orban Attila Kisbenedek/Getty Images

    The Hungarian Government’s Failed Campaign of Lies

    The Hungarian government has released the results of its "national consultation" on what it calls the "Soros Plan" to flood the country with Muslim migrants and refugees. But no such plan exists, only a taxpayer-funded propaganda campaign to help a corrupt administration deflect attention from its failure to fulfill Hungarians’ aspirations.

  6. Project Syndicate

    DEBATE: Should the Eurozone Impose Fiscal Union?

    French President Emmanuel Macron wants European leaders to appoint a eurozone finance minister as a way to ensure the single currency's long-term viability. But would it work, and, more fundamentally, is it necessary?

  7. The Year Ahead 2018

    The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

    Order now