Economic thought and the making of European Monetary Union

Book abstract:

This work makes a valuable contribution to the dialogue between the academic community and the world of European economic policy-making. It analyses the relationship between economic thought and European integration, focusing on economic thought and the policy-making process.

Arranged in three parts: Part I 'Early debates on European monetary integration' takes the reader through the 1950s and market post-war integration theory. It follows a chronological pattern on into the arguments surrounding fixed and flexible currencies which abounded in the 1960s before moving to discussion of the Werner Report and the failure of the European Community's first attempt at monetary union in the 1970s.

Part II of the book looks to the institutions of the Community and particularly the European Commission. It offers further analysis of the specificity of economic thought at the European Commission and considers the early influence of German ordo-liberalist thinking and French ideas on indicative planning with the later Anglo-Saxon ideas. Evolution of economic thought is analysed, moving through the initial dominance of Keynesian economics to the more monetarist and supply side oriented approach and the simultaneous shift towards a view of the European economy as a whole rather than the earlier focus on the national economies. A case study considering Europe's unemployment problem follows and provides an extensive analysis of the distinguishing characteristics of economics at a policy-making institution like the European Commission compared to academic economics.

Part III 'The Making of European Monetary Union' presents a historical perspective beginning with an overview of the process of European monetary integration giving special attention to debates between 'monetarists' and 'economists'. Analysis then goes on to the reasons for the successful realisation of EMU and draws distinction between long term structural factors and the specific momentum of the integration process in the second half of the 1980s and the 1990s. The work closes with a report on the role of Belgium and endeavours to illustrate that EMU was a truly multilateral achievement and not just a process steamrollered by the larger Franco-German influences.

Ivo Maes is a Deputy Head of the Research Department at the National Bank of Belgium, and a Professor at the University of Leuven and at the ICHEC, Brussels Belgium.