EMU in Opposition: Consensus, Conflict and Conditionality

Abstract

After the Second World War, the Bretton Woods International Monetary System was established by the Western market economies. Under US dominance, this system was designed to ensure the monetary stability necessary for economic regeneration to take place. By the 1960s, however, it had come under great pressure through exchange rate fluctuations, which led to the devaluation of the French Franc and the revaluation of the West German Mark. The problems in France and Germany, in turn, ‘threatened the stability of other [European] currencies’,¹ challenging the increasing levels of trade and the solidity of EU policies inside the European Community. Within this context, the Hague Summit of December 1969 first made economic and monetary union a goal of European integration through proposals to create narrow margins of exchange rate fluctuation within the EC (the Werner report, 1970). In March 1972, the so-called ‘snake in the tunnel’ was launched, which consisted of a managed floating of currencies (‘the snake’) within narrow margins of fluctuation against the US Dollar (‘the tunnel’). Thrown off course by oil crises, the weakness of the dollar and differences in economic policy, the snake lost most of its members in less than two years, and was reduced to a ‘Deutschmark’ area (Germany, Benelux and Denmark). In 1979, a new initiative was launched by French President, Valery Giscard D’Éstaing, and German Chancellor, Helmut Schmidt, to create greater monetary stability through a European Monetary System (EMS). The Single European Act launched the Community’s Single Market Programme, which, when combined with the success of the EMS, further enhanced the integrative logic of a Single Currency. The political will to actualise this logic emerged in the late 1980s as a response to climatic changes that included German unification.