European monetary integration and domestic politics

Book abstract:

This book considers why three countries, Britain, France and Italy, that faced similar problems of high inflation and currency depreciation since the 1970s, pursued very different international monetary strategies. The central goal of the book is to explain the differences in exchange rate policies and institutional policies between these countries. The principal contribution of the book is empirical; testing the explanatory power of existing theories with evidence drawn from the British, French and Italian experiences. The author, James I. Walsh, argues that international monetary policies produce predictable sets of winners and losers, and that policy choice is a function of how industrial firms, banks, and labour unions organise and deploy their political resources. He draws on a wealth of primary data and interviews to reconstruct the domestic politics and international bargaining behind Europe's single currency.

The chapters are: Politics and exchange rates; Negotiating the European monetary system; Exchange-rate politics, 1979-1988; Negotiating monetary union; Exchange-rate politics, 1989-1999; Conclusions and prospects. The concluding chapter pulls together the evidence from the preceding four chapters to summarise the findings regarding political sources of exchange-rate policy and international institutions; analyses European monetary institutions negotiated in the 1990s to see if these more recent developments accord with the findings that distributional bargaining rather than learning drives agreement on specific institutional rules; and explores the findings' implications for future societal exchange-rate policy preferences, the operation of the European Central Bank, and the development of the new European institutions to underpin the single currency.

James I. Walsh is assistant professor of political science at the University of North Carolina, Charlotte.