Linkages Between Monetary Union and Political Union in the European Union

Abstract

Economists, politicians and the public largely agree that political factors are involved both in the decision to move towards economic integration and in the more detailed formulation of that decision. The integration process within the framework of the European Union is a classic example of the political dimensions of economic integration, which are particularly pronounced whenever monetary integration is involved (Theurl 1991; Reeh 1993). European monetary unification is not only the technical process of an irreversible merging of national currencies into a single European currency. It is a step which reflects profound political aims and which has equally profound political implications. It has, moreover, much wider implications for the economic policy regimes of European countries which are associated with it. One can really speak of a “push towards politicalization” as a result of the agreement on European monetary union (Schneider 1991, p. 55). “Given the Member States’ different political, economic and social priorities as well as perceptions, a single currency could only be introduced on the basis of a broad political package which reconciled different priorities and eased different perceptions. Most important, this package had to assure that the costs and benefits, but also the risks, were balanced out and equitably distributed during the run-up to the introduction of a single currency as well as afterwards” (Reeh 1993, p. 222).