Public Choice Aspects of European Monetary Unification

Abstract

energy and political capital on the issue of monetary union. ’ In early 1989, the Delors Committee, consisting of EC central bank representatives and chaired by Commission President Jacques Delors, took a further step on the long road to a European monetary union (MU). Its report (Commission 1989) was formally approved as a blueprint for the creation of an MU by the Council of Ministers at the June 1989 summit in Madrid. We will assess some of the main issues involved in designing a strategy for MU and discuss the features ofthe Delors Report as aproposal for achieving this goal. There will be no discussion of whether or not the EC represents an optimal currencyarea, nor will we discussthe benefits and costs ofa monetary union. 2 Our primary focus will be on the public choice aspects of monetary union. The Delors Report: A Strategy for Monetary Union The Delors Report consists ofthree main components: one dealing with economic union (EU), another dealing with the construction of an MU, and a third dealing with fiscal policy in an MU. We focus on three critical aspects of the report: the principle of parallelism, the choice of the European Monetary System (EMS) as the basis for an MU, and the recommendation for binding fiscal restraints on national governments.

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