NOTE:
These notes should be used only as guidance; they DO NOT substitute
the recommended readings and DO NOT summarise the seminar
discussions.
EU446 Seminar – Week 2
Question:
Why was the EMU project re-launched in 1988?
Dimensions
1. Historical background: how was it re-launched?
2. Permissive, contextual and objective factors:
a. Why re-launch?
b. Why an agreement?
c. Why an EMU?
3. Theoretical issues: the theory behind the negotiations
Analysis
1. Background
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Need to remove dependence to US $ and monetary policy
Need for stability in unified markets (e.g., CAP)
The Hague summit and the Werner Report (a European solution
– parallelism between coordination in economic policy and in
monetary policy – towards a monetary and political union)
The ‘snake’ (unstable due to collapse of Bretton Woods)
The EMS/ERM (unstable initially due to oil shocks but
successful in achieving stability and low inflation)
Ideology: developing ‘culture’ for disinflation, budgetary
discipline, and currency stability (policy credibility)
2. Factors
a. Why re-launch
(i)
Dissatisfaction with asymmetry of EMS (dominance of DM and
Bundesbank’s monetary policy – high interest rates)
(ii) (Prospect of) free capital movement undermined stability of
EMS
(iii) The ‘inconsistent quartet’ (free trade, capital mobility,
EMS/fixed x-rates, independent monetary policy)
(iv) Role of leadership / ideology (Grescher, Delors, Kohl,
Mitterrand)
(v) Delors Committee (technocratic legitimacy to EMU project)
(vi) Need to ‘integrate’ Germany speeded-up the process (‘threat’ of
German reunification / credibility movement for Germany)
(vii) Structural
economic
interests
(need
for
stability,
competitiveness and credibility)
(viii) Convergence of macro-economic policies (monetarist /
disinflationary)
(ix) Germany needed a ‘German Europe’
b. Why an agreement
(i)
Strong preferences of central actors – national (Kohl,
Mitterrand), transnational (Grescher), supranational (Delors)
(ii) Enthusiasm from SEA/1992/Single Market
(iii) Positive public opinion (initially) and ‘push’ by interest groups
(iv) The politics of EMS (French-German interests / asymmetries)
(v) Foreign policy beliefs (pan-Europeanism, German unification,
EPU)
(vi) Need for credible/rational institutions (need for external
pressures / ‘tie ones hand’)
c. Why an EMU
(i)
Alternatives to EMU
1. unilateral approach: own macroeconomic discipline (CB
independence or pegging on low-inflation currency)
2. multilateral approach: stay with EMS/ERM (allows
flexibility/fluctuations with credibility/discipline)
3. integrative approach: proceed with EMU (more
credibility/enforcement, external discipline, further
integration and future convergence)
(ii)
Main reasons for integrative approach
1. policy convergence
2. ‘inconsistent quartet’
3. role of leadership / actors
(iii)
The characteristics of Maastricht / the EMU
1. ECB – autonomous monetary policy
2. EMU convergence criteria
3. 3-pillar design: Court and Commission limited to EU
matters (not defence (2) and police/migration(3))
4. Extension of QMV
5. (Modest) expansion of parliamentary co-decision
3. Theory
(i)
Structure or agency?
1. conditioned on structure (globalisation, finance, EMS)
2. influenced by agency (actors & institutional venues –
IGCs / Delors Report)
(ii)
Intergovernmental or supranational?
1. Intergovernmental bargaining (IGCs reflecting national
preferences)
2. NOT supranational (unlike SEA, limited role of
Commission – but Delors?)
3. Intergovernmental bargaining was efficient duo to
structure of interests
4. But structure of preferences is endogenous to structural
and supranational-agency factors (1992 optimism, EMS
asymmetries, ‘tie ones hand’ + Delors Committee)
(iii)
Type of bargaining
1. Unitary-agent explanations only have a limited
explanatory power (e.g., German position)
2. Two-level games highlight role of intergovernmental
bargaining (smaller win-sets give more bargaining power
in level 1)
3. Issue-linkage also highly relevant (link issues to win
foreign / domestic support – or to bargain concessions)
4. Issue-linkage might change the domestic win-sets and
thus change equilibrium at level 1 (consistent with twolevel games and intergovernmental bargaining)
Discussion
- Why is the nature of the ‘re-launch’ important?
(understand EMU- path, structure, agency, ideology)
- What are the contextual factors?
(history, institutional path, actors, ideology/beliefs - structure vs
agency)
- Discuss the relative importance of the various factors
(no ‘correct’ ranking - but need to discuss which factors and why /
how)
- Differentiate between factors that led to re’-launch and factors that led to
agreement – elaborate on factors for agreement: how do they relate to
theory?
- Discuss what each actor wanted – what alternatives where there – was
EMU ‘inevitable’? – who ‘won’
- Need to discuss the position, background, interests, limitations, and
dilemmas of each of the major actors
(Delors/Comission – Kohl/Germany – Mitterant/France – UK –
business/bankers – other?)