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The Economic and Monetary Union

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European Integration and the Global Financial Crisis

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Abstract

This essay first outlines the process that led to the establishment of the EMU. It then explains how the sovereign debt crisis unfolded in the eurozone in light of the institutional features of the EMU and its reform in response to the crisis, most notably through the establishment of the Banking Union.

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Notes

  1. 1.

    Kenneth Dyson, The Politics of the Eurozone (Oxford: Oxford University Press, 2000); Dermot Hodson and Imelda Maher, ‘Economic and Monetary Union: Balancing Credibility and Legitimacy in an Asymmetric Policy-Mix’, Journal of European Public Policy 9, no. 3 (2002), 391–407; Amy Verdun, ‘A “Asymmetrical” Economic and Monetary Union in the EU: Perceptions of Monetary Authorities and Social Partners’, Journal of European Integration 20, no. 2 (1996), 59–81.

  2. 2.

    Emmanuel Mourlon-Druol, A Europe Made of Money (Ithaca: Cornell University Press, 2012); Kenneth Dyson and Lucia Quaglia, European Economic Governance and Policies. Volume I: Commentary on Key Historical and Institutional Documents (Oxford: Oxford University Press, 2010).

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  4. 4.

    David Howarth, The French Road to European Monetary Union (Basingstoke: Palgrave, 2001); Ivo Maes and Amy Verdun, ‘Small States and the Creation of EMU: Belgium and the Netherlands, Pace-Setters and Gate-Keepers’, Journal of Common Market Studies 43, no. 2 (2005), 327–348; Mourlon-Druol, A Europe Made of Money.

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    Horst Ungerer, A Concise History of European Monetary Integration (London: Quorom Books, 1997).

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  7. 7.

    The private ECU was a contract in which the contracting parties had payments obligations denominated in the ECU.

  8. 8.

    Ivo Maes, Economic Thought and the Making of European Monetary Union (Cheltenham: Edward Elgar, 2002).

  9. 9.

    Andre Szasz, The Road to European Monetary Union (London: MacMillan, 1999); Mourlon-Druol, A Europe Made of Money.

  10. 10.

    Ungerer, A Concise History of European Monetary Integration.

  11. 11.

    Peter Ludlow, The Making of the European Monetary System (London: Butterworth Scientific, 1982).

  12. 12.

    Szasz, The Road to European Monetary Union.

  13. 13.

    Ungerer, A Concise History of European Monetary Integration.

  14. 14.

    Harold James, Making the European Monetary Union (Harvard: Harvard University Press, 2012).

  15. 15.

    Tommaso Padoa-Schioppa et al., Efficiency, Stability and Equity (Oxford: Oxford University, 1987).

  16. 16.

    Padoa-Schioppa, Efficiency, Stability and Equity.

  17. 17.

    Howarth, The French Road to European Monetary Union; Dyson and Quaglia, European Economic Governance and Policies.

  18. 18.

    Gros and Thygsen, European Monetary Integration; James, Making the European Monetary Union.

  19. 19.

    Committee for the Study of Economic and Monetary Union, Report on Economic and Monetary Union in the European Community (Delors Committee Report) (Brussels: European Commission, 1989), 43.

  20. 20.

    James, Making the European Monetary Union.

  21. 21.

    Committee for the Study of Economic and Monetary Union, Report on Economic and Monetary Union.

  22. 22.

    Padoa-Schioppa, Efficiency, Stability and Equity.

  23. 23.

    Kenneth Dyson and Kevin Featherstone, The Road to Maastricht (Oxford: Oxford University Press, 1999); Chang, Economic and Monetary Union.

  24. 24.

    Andrew Moravcsik, The Choice for Europe (London: University College London Press, 1998); Karl Kaltenthaler, Germany and the Politics of Europe’s Money (Durham: Duke University, 1998); Peter Loedel, Deutsche Mark Politics: Germany in the European Monetary System (Boulder: Lynne Rienner, 1999).

  25. 25.

    Kaltenthaler, Germany and the Politics of Europe’s Money; Loedel, Deutsche Mark Politics.

  26. 26.

    Moravcsik, The Choice for Europe; Howarth, The French Road to European Monetary Union.

  27. 27.

    Featherston and Dyson, The Road to Maastricht.

  28. 28.

    Jeffrey Frieden, ‘The Impact of Goods and Capital Market Integration on European Monetary Politics’, Comparative Political Studies 12 (1996), 193–222; James Walsh, European Monetary Integration and Domestic Politics: Britain, France and Italy (London: Lynner Rienner, 2000).

  29. 29.

    Wayne Sandholtz, ‘Choosing Union: Monetary Politics and Maastricht’, International Organisation 47, no. 1 (1993), 1–39; Nicholas Jabko, ‘In the Name of the Market: How the European Commission Paved the Way for Monetary Union’, Journal of European Public Policy 6, no. 3 (1999), 475–495; Amy Verdun, ‘The Role of the Delors Committee in the Creation of EMU: An Epistemic Community?’ Journal of European Public Policy 6, no. 2 (1999), 309–328.

  30. 30.

    Jabko, ‘In the Name of the Market’.

  31. 31.

    European Commission, One Market, One Money (Brussels, 1990).

  32. 32.

    Padoa-Schioppa, Efficiency, Stability and Equity.

  33. 33.

    Francesco Giavazzi, Stefano Micossi and Mark Miller, The European Monetary System (Cambridge: Cambridge University Press, 1989); Paul De Grauwe, ed., The European Monetary System in the 1990s (London: Longman, 1990).

  34. 34.

    Kathleen McNamara, The Currency of Ideas: Monetary Politics in the European Union (Ithaca: Cornell University Press, 1998); Markus K. Brunnermeier, Harold James and Jean-Pierre Landau, The Euro and the Battle of Ideas (Princeton: Princeton University Press, 2017); Amy Verdun, European Responses to Globalization and Financial Market Integration: Perceptions of Economic and Monetary Union in Britain, France and Germany (Basingstoke: Palgrave, 2000); Lucia Quaglia, ‘Italy’s Policy Towards European Monetary Integration: Bringing Ideas Back in?’ Journal of European Public Policy 11, no. 6 (2004), 1096–1111.

  35. 35.

    Martin Marcussen, Ideas and Elites (Aalborg: Aalborg University, 2000); Verdun, ‘The Role of the Delors Committee’.

  36. 36.

    Macnamara, The Currency of Ideas.

  37. 37.

    Kenneth Dyson, The Politics of the Eurozone (Oxford: Oxford University Press, 2000).

  38. 38.

    Dyson and Featherstone, The Road to Maastricht.

  39. 39.

    Loedel, Deutsche Mark Politics.

  40. 40.

    Dyson, The Politics of the Eurozone; Dermot Hodson, Governing the Euro Area in Good Times and Bad (Oxford: Oxford University Press, 2011).

  41. 41.

    Dyson and Featherstone, The Road to Maastricht.

  42. 42.

    Howarth, The French Road to European Monetary Integration.

  43. 43.

    Padoa-Schioppa, The Road to Monetary Union in Europe.

  44. 44.

    James, Making the European Monetary Union; Hodson, Governing the Euro Area in Good Times and Bad.

  45. 45.

    David Howarth and Lucia Quaglia, ‘The Political Economy of the Euro Area’s Sovereign Debt Crisis: Introduction’, Review of International Political Economy 22, no. 3 (2015), 457–484.

  46. 46.

    Adam Tooze, Crashed: How a Decade of Financial Crisis Changed the World (London: Allen Lane, 2018); Lucia Quaglia, Rob Eastwood and Peter Holmes, ‘The Financial Turmoil and EU Policy Cooperation 2007-8’, Journal of Common Market Studies 47, suppl. 1 (2009), 1–25.

  47. 47.

    The pact, which was agreed at the Amsterdam European Council in 1997, established 3% of GDP as the upper limit of fiscal deficit, aiming for fiscal balance in the medium-term, with fines of up to 0.5% of GDP to be imposed on countries with excessive deficits. See Martin Heipertz and Amy Verdun, Ruling Europe: The Politics of the Stability and Growth Pact (Cambridge: Cambridge University Press, 2010).

  48. 48.

    Dirk Schoenmaker, Governance of International Banking: The Financial Trilemma (Oxford: Oxford University Press, 2013); David Howarth and Lucia Quaglia, The Political Economy of European Banking Union (Oxford: Oxford University Press, 2016).

  49. 49.

    Tooze, Crashed; Hodson, Governing the Euro Area in Good Times and Bad.

  50. 50.

    Matthias Matthijs and Mark Blyth, eds., The Future of the Euro (Oxford: Oxford University Press, 2015); Howarth and Quaglia, ‘The Political Economy of the Euro Area’s Sovereign Debt Crisis’.

  51. 51.

    Frank Schimmelfennig, ‘Liberal Intergovernmentalism and the Euro Area Crisis’, Journal of European Public Policy 22, no. 2 (2015), 177–195; Shawn Donnelly, Power Politics, Banking Union and EMU: Adjusting Europe to Germany (London: Routledge, 2018); Howarth and Quaglia, The Political Economy of European Banking Union.

  52. 52.

    Ledina Gocaj and Sophie Meunier, ‘Time Will Tell: The EFSF, the ESM, and the Euro Crisis’, in Redefining European Economic Governance, eds. Michele Chang, Georg Menz and Mitchell P. Smith (London: Routledge, 2017); Waltraud Schelkle, Understanding the Euro Experiment (Oxford: Oxford University Press, 2017).

  53. 53.

    Donnelly, Power Politics, Banking Union and EMU; Shawn Donnelly, ‘Power Politics and the Undersupply of Financial Stability in Europe’, Review of International Political Economy 21, no. 4 (2014), 980–1005.

  54. 54.

    Chang, Economic and Monetary Union; Dermot Hodson, ‘Eurozone Governance: From the Greek Drama of 2015 to the Five Presidents’ Report’, Journal of Common Market Studies 54, suppl. 1 (2016), 150–166.

  55. 55.

    Dyson and Featherstone, The Road to Maastricht.

  56. 56.

    Daniel Gros, ‘The Single European Market in Banking in Decline – ECB to the Rescue?’, in Banking Union for Europe: Risks and Challenges, ed. Thomas Beck (London: CEPR, 2012), 49–54; Silvia Merler and Jean Pisani-Ferry, ‘Hazardous Tango: Sovereign-Bank Interdependence and Financial Stability in the Euro Area’, Banque de France Financial Stability Review 16 (2012), 201–210.

  57. 57.

    Donnelly, Power Politics, Banking Union and EMU; Howarth and Quaglia, The Political Economy of European Banking Union; Frank Schimmelfennig, ‘A Differentiated Leap Forward: Spillover, Path-Dependency, and Graded Membership in European Banking Regulation’, West European Politics 39, no. 3 (2016), 483–502.

  58. 58.

    Lucia Quaglia, ‘The Politics of an “Incomplete” Banking Union and Its “Asymmetric” Effects’, Journal of European Integration 41, no. 8 (2019), 955–969.

  59. 59.

    Donnelly, Power Politics; Joachim Schild, ‘Germany and France at Cross Purposes: The Case of Banking Union’, Journal of Economic Policy Reform 21, no. 2 (2018), 102–117; Sergio Fabbrini, ‘Intergovernmentalism and Its Limits: Assessing the European Union’s Answer to the Euro Crisis’, Comparative Political Studies 46, no. 9 (2013), 1003–1029; Chris Bickerton, Dermot Hodson and Uwe Puetter, eds., The New Intergovernmentalism: States and Supranational Actors in the Post-Maastricht Era (Oxford: Oxford University Press, 2015).

  60. 60.

    David Howarth and Lucia Quaglia, ‘The Steep Road to Banking Union: The Setting Up of the Single Resolution Mechanism’, Journal of Common Marker Studies 50, suppl. 1 (2014), 125–140.

  61. 61.

    Howarth and Quaglia, The Political Economy of Banking Union.

  62. 62.

    Schild, ‘Germany and France at Cross Purposes’.

  63. 63.

    Simon Bulmer, ‘Germany and the Eurozone Crisis: Between Hegemony and Domestic Politics’, West European Politics 37, no. 6 (2014), 1244–1263; Simon Bulmer and Willy Paterson, ‘Germany as the EU’s Reluctant Hegemon? Of Economic Strength and Political Constraints’, Journal of European Public Policy 20, no. 10 (2013), 1387–1405.

  64. 64.

    Stefan De Rynck, ‘Banking on a Union: The Politics of Changing Eurozone Banking Supervision’, Journal of European Public Policy 23, no. 1 (2015), 119–135; Rachel Epstein and Martin Rhodes, ‘The Political Dynamics behind Europe’s New Banking Union’, West European Politics 39, no. 30 (2016), 415–437; Gabriel Glöckler, Johannes Lindner and Marion Salines, ‘Explaining the Sudden Creation of a Banking Supervisor for the Euro Area’, Journal of European Public Policy 24, no. 8 (2016), 1135–1153; Bodil Nielsen and Sandrino Smeets, ‘The Role of the EU Institutions in Establishing the Banking Union: Collaborative Leadership in the EMU Reform Process’, Journal of European Public Policy 25, no. 9 (2018), 1233–1256.

  65. 65.

    Tooze, Crashed.

  66. 66.

    David Schaffer, ‘A Banking Union of Ideas? The Impact of Ordoliberalism and the Vicious Circle on the EU Banking Union’, Journal of Common Market Studies 54, no. 4 (2016), 961–980; Vivienne Schmidt, ‘Speaking to the Markets or to the People? A Discursive Institutionalist Analysis of the EU’s Sovereign Debt Crisis’, British Journal of Politics & International Relations 16, no. 1 (2014), 188–209.

  67. 67.

    Schaffer, ‘A Banking Union of Ideas’, 962.

  68. 68.

    Matthias Matthijs, ‘Powerful Rules Governing the Euro: The Perverse Logic of German Ideas’, Journal of European Public Policy 23, no. 3 (2016), 375–391.

  69. 69.

    Tanja Boerzel and Thomas Risse, ‘From the Euro to the Schengen Crises: European Integration Theories, Politicization, and Identity Politics’, Journal of European Public Policy 25, no. 1 (2018), 83–108; Martin Carstensen and Vivienne Schmidt, ‘Power and Changing Modes of Governance in the Euro Crisis’, Governance 31, no. 4 (2018), 609–624; Lucia Quaglia and Aneta Spendzharova, ‘The Conundrum of Solving “Too Big to Fail” in the European Union: Supranationalization at Different Speeds’, Journal of Common Market Studies 55, no. 5 (2017), 1110–1126.

  70. 70.

    Erik Jones, Daniel Kelemen and Sophie Meunier, ‘Failing Forward? The Euro Crisis and the Incomplete Nature of European Integration’, Comparative Political Studies 49, no. 7 (2016), 1010–1034.

  71. 71.

    Jones, Kelemen and Meunier, ‘Failing Forward’.

  72. 72.

    David Howarth and Lucia Quaglia, ‘Theoretical Lessons from EMU and Banking Union: Plus ça change’, in The Difficult Construction of European Banking Union, eds. David Howarth and Joachim Schild (London: Routledge, 2020).

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  1. University of Bologna, Bologna, Italy

    Lucia Quaglia

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  1. Department of Civilization and Forms of Knowledge, University of Pisa, Pisa, Italy

    Michele Di Donato

  2. Scuola Normale Superiore di Pisa, Pisa, Italy

    Silvio Pons

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Quaglia, L. (2023). The Economic and Monetary Union. In: Di Donato, M., Pons, S. (eds) European Integration and the Global Financial Crisis. Security, Conflict and Cooperation in the Contemporary World. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-06797-6_3

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