Making the European Monetary Union

Europe's financial crisis cannot be blamed on the Euro, Harold James contends in this probing exploration of the whys, whens, whos, and what-ifs of European monetary union. The current crisis goes deeper, to a series of problems that were debated but not resolved at the time of the Euro's invention. Since the 1960s, Europeans had been looking for a way to address two conundrums simultaneously: the dollar's privileged position in the international monetary system, and Germany's persistent current account surpluses in Europe. The Euro was created under a politically independent central bank to meet the primary goal of price stability. But while the monetary side of union was clearly conceived, other prerequisites of stability were beyond the reach of technocratic central bankers. Issues such as fiscal rules and Europe-wide banking supervision and regulation were thoroughly discussed during planning in the late 1980s and 1990s, but remained in the hands of member states. That omission proved to be a cause of crisis decades later. Here is an account that helps readers understand the European monetary crisis in depth, by tracing behind-the-scenes negotiations using an array of sources unavailable until now, notably from the European Community's Committee of Central Bank Governors and the Delors Committee of 1988--89, which set out the plan for how Europe could reach its goal of monetary union. As this foundational study makes clear, it was the constant friction between politicians and technocrats that shaped the Euro. And, Euro or no Euro, this clash will continue into the future.

About the Author :
Harold James is the Claude and Lore Kelly Professor in European Studies and Professor of History and International Affairs at Princeton University.

Review :
The roots of Europe's economic meltdown are unearthed in this massive, illuminating study of the institution that was supposed to prevent it. Princeton historian James traces the decades-long process by which the Committee of Governors of Europe's national central banks incubated and then implemented the idea of a Europe-wide monetary union and common currency-which finally morphed into the European Central Bank. Drawing on extensive archival research, he recaps in dense detail the sharp policy debates between bank chiefs and sets them against the periodic European exchange-rate disruptions that goaded them toward monetary reform. Throughout, James highlights problems that would later precipitate the present-day euro crisis: imbalances between Germany's trade surpluses and other countries' deficits; clashes between independent central banks seeking price stability and inflationary government economic policies; the difficulty of imposing fiscal discipline on individual nations; lousy regulatory oversight of a surging European financial industry... It is quite readable and even manages to convey the humanity of banking officials. The result is a lucid account of the labyrinthine topic of European Union monetary policy and its discontents. Publishers Weekly 20120910 [A] compelling book on the origins of EMU...Using previously secret documentation made available from central banking archives, as well as his own colossal historical insights and experience, James provides a masterful overview of the process of building a common money. -- David Marsh MarketWatch 20121015 James's focus on the EMU's development yields insights about current regional financial crises. This in-depth history will appeal to academic readers looking for extensive details about the EMU from several decades. -- Caroline Geck Library Journal 20121001 Of considerable interest to the economically inclined; a thoroughgoing demonstration of how fragile are monetary unions 'without some measure of fiscal union.' Kirkus Reviews 20121101