A Europe Made of Money

A Europe Made of Money: The Emergence of the European Monetary System

Emmanuel Mourlon-Druol
Copyright Date: 2012
Edition: 1
Published by: Cornell University Press
Pages: 368
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  • Book Info
    A Europe Made of Money
    Book Description:

    A Europe Made of Money is a new history of the making of the European Monetary System (EMS), based on extensive archive research. Emmanuel Mourlon-Druol highlights two long-term processes in the monetary and economic negotiations in the decade leading up to the founding of the EMS in 1979. The first is a transnational learning process involving a powerful, networked European monetary elite that shaped a habit of cooperation among technocrats. The second stresses the importance of the European Council, which held regular meetings between heads of government beginning in 1974, giving EEC legitimacy to monetary initiatives that had previously involved semisecret and bilateral negotiations. The interaction of these two features changed the EMS from a fairly trivial piece of administrative business to a tremendously important political agreement.

    The inception of the EMS was greeted as one of the landmark achievements of regional cooperation, a major leap forward in the creation of a unified Europe. Yet Mourlon-Druol's account stresses that the EMS is much more than a success story of financial cooperation. The technical suggestions made by its architects reveal how state elites conceptualized the larger project of integration. And their monetary policy became a marker for the conception of European identity. The unveiling of the EMS, Mourlon-Druol concludes, represented the convergence of material interests and symbolic, identity-based concerns.

    eISBN: 978-0-8014-6593-2
    Subjects: History

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. List of Abbreviations
    (pp. vii-viii)
  4. Introduction: Multilevel Governance, History, and Monetary Cooperation
    (pp. 1-14)

    The creation of the European Monetary System (EMS) is traditionally considered one of the landmarks of postwar Western European history. Many textbooks stress that it was an example of how European elites coped with global economic change. The advent of floating exchange rates, following the collapse of the Bretton Woods system in the early 1970s, was harmful for Western European economies, and the EMS constituted a European response. The EMS represented, indeed, the first serious attempt at reintroducing a semifixed exchange rate system on a European basis. And most important, that European response would have a strong influence on the...

  5. 1 EUROPEAN MONETARY COOPERATION, 1945–1974: Background and Debates
    (pp. 15-29)

    This first chapter recalls several key ideas necessary to understand the working of monetary coordination. A first important one is the so-called triangle of compatibilities, or trilemma. According to Mundell, of the three components of his “holy trinity”—high capital mobility, fixed exchange rates, and independent monetary policy—only two can be met at the same time. For instance, under the Bretton Woods system, fixed exchange rates and autonomous monetary policies were able to coexist thanks to low levels of capital mobility. The rising of capital mobility from the late 1960s onward rendered unsustainable the maintaining of fixed exchange rates,...

    (pp. 30-64)

    Despite the snake’s failures and the abandonment of the Werner Plan, monetary discussions did not stop in 1974. On the contrary, that year saw the multiplication of initiatives in the monetary field. This chapter examines the extent to which the partial buildup of consensus about the need for action at the European level and about the need to adopt stability-oriented economic policies permitted the Nine to take several steps forward in European monetary affairs. I will first describe the context in which these various proposals appeared. Second, I will analyze in detail the parallel attempts of the Commission and, crucially,...

  7. 3 EMU OFF THE AGENDA? JUNE 1975–JUNE 1976
    (pp. 65-98)

    Why and how did economic divergences induce only the partial disappearance of monetary cooperation from the European Community’s agenda between June 1975 and June 1976? In this chapter I first concentrate on the development of a more positive EEC climate after the settlement of the British renegotiation issue. The change in the British position gave a renewed psychological impetus to European (monetary) cooperation, although only for a moment. On this occasion the hope of a European relaunch lasted until the French government abandoned its stability-oriented economic policy in favor of a new, Keynesian-inspired economic plan. I then concentrate on this...

    (pp. 99-131)

    In this chapter I analyze the paradoxical double turnaround in mid-1976: the improvement of economic convergence among EEC member states but the relative standstill in European monetary cooperation. I cover the period starting with the decision of the newly appointed French government to follow a strong anti-inflationary program until just before the Commission’s decision to prioritize monetary union in mid-1977. First, I analyze the “Duisenberg proposals” (named after the Dutch finance minister Wim Duisenberg) put forward in mid-1976 and the emergence of an essentially Franco-German consensus about the need to prioritize the fight against inflation. Second, I scrutinize the reactions...

    (pp. 132-162)

    In this chapter I analyze the reappearance of the EMU debate at the very top of the EEC’s political agenda, from the decision of the Commission to prioritize monetary cooperation in mid-1977, until before preparation of the European Council’s meeting of April 1978 in Copenhagen. I will do so in three steps. I will first examine why and how the Commission decided to prioritize monetary cooperation in the EEC in mid- to late 1977. Second, I will scrutinize events before, during, and after the Brussels European Council in 1977, at which the EEC heads of government had planned to take...

    (pp. 163-195)

    In this chapter I analyze the quest for a new philosophy of the EEC exchange rate system, from Schmidt’s “exotic idea”¹ of late March to publication of the Bremen Annex in mid-July 1978. One of the characteristics of the negotiations leading up to the Bremen European Council was that they were conducted at various levels (heads of government, specialized committees, ad hoc committee) but also in a semisecret fashion. In addition to the usual chronological analysis of the period, I will therefore have the additional task of giving a clear picture of this multilayered negotiation. The actors themselves saw each...

    (pp. 196-227)

    The immediate post-Bremen atmosphere was well captured by The Economist, which wondered, in August, whether EMU would “lay an egg.”¹ This snappy catchphrase showed the extent to which the new monetary negotiations, which had (officially)² commenced after the Bremen European Council, had a historical record of inefficiency to contend with. As I have shown in the previous chapters, European monetary cooperation since 1974 had witnessed a circulation of fascinating monetary ideas that were often, however, ill timed and ill suited, and always suffering from a lack of political support. In many respects, the EMS negotiations thus looked like an umpteenth...

  12. 8 A FALSE START, OCTOBER 1978-MARCH 1979
    (pp. 228-260)

    In this chapter I analyze the end of the EMS negotiations and the launch of the new system. The chapter covers the second and last phase of the negotiations, from the decision to adopt a parity-grid system until the entry into force of the EMS in March 1979. By contrast to the previous chapter, this period was much more about “filling in the details,” since the basics of the exchange rate mechanism had already been agreed on: by ruling out the ECU-based option as a basis for the new exchange rate system, the basic shape of the EMS had been...

    (pp. 261-282)

    There is a striking contrast between the EMS’s lack of technical originality and its political, political-psychological, political-economy dimension and later influence. The political dimension of the EMS was indeed so strong that it managed to create the perception over the long run that the EMS was a truly new and innovative mechanism. Since the 1960s, the CAP had been the EEC’s flagship policy, although its influence was admittedly progressively diminishing.¹ With the inception of the EMS, monetary cooperation and integration moved to the very top of the EEC’s political agenda, partly replacing the CAP as the EEC’s flagship endeavor, and...

  14. Acknowledgments
    (pp. 283-284)
  15. A Note on Sources Cited in the Notes
    (pp. 285-286)
  16. Notes
    (pp. 287-336)
  17. Sources
    (pp. 337-348)
  18. Index
    (pp. 349-360)