The Political Economy of European Monetary Unification

Abstract

This introduction presents an overview of the key concepts discussed in the subsequent chapters of this book. The book considers the experiences of France and Italy in the early years of the European monetary unification (EMU). Despite the outpouring of research, prompted by EMU, few accounts have systematically analyzed both its political and its economic aspects. The book examines the domestic political bases of support for EMU. It explores how socioeconomic status affects sentiment toward monetary union. The book presents evidence that monetary unification might not entail the economic sacrifices many expect. It shows that local prices have not responded quickly to exchange rate movements, which means that the exchange rate has not been an effective tool of macroeconomic policy. The book also examines how interstate bargaining made EMU possible and affects its future. It analyzes the Maastricht Treaty as a bargain between Germany a country standing to gain little from monetary union per se, and the rest of Europe.

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