Economic and Monetary Union: Pillar of a Federal Polity

Abstract

The Masastricht Treaty commitment to the economic and monetary union (Emu) follows a lengthy process of building up monetary integration, starting with the European Monetary System (1979), then, in the 1980s, the free movement of capital and integration offinancial markets. Emu, representing the final stage of this process, is seen by most federalists as a pillar in the structure of the European Union, contributing to its development by stages into a federal polity. With the economic and monetary union, the European Union's economic and environmental powers are becoming comparable to those of some federations, and with institutions that have over time acquired substantial federal elements, further reforms may well make the European Union into a federal system. This article identifies the forces, interests, and methods involved in an incremental process that may be called a new federalism. The project of economic and monetary union is a response to the interdependence of European currencies and financial markets. As transactions across frontiers increased, the currencies of European states became less efficient in economic terms, and their monetary autonomy declined. Support for a single currency grew, both from economic interests that stood to gain through the greater efficiency, and from governments that wished to exchange the shadow of separate sovereignties for the substance of a shared autonomy. Political forces also saw economic and monetary union (Emu), and the single currency that is at its heart, as a contribution to stability and security more generally, reinforcing the guarantee of peace among the participants and the safe anchorage of Germany among its neighbors. This article argues that both the economic and the political motives were