Governance in the Euro Area: Approaching an Optimum Currency Area?

Abstract

Almost 45 years have passed since the member states of the then European Economic Community (EEC) began to discuss moving towards a single currency. Near the end of the 1960s the global monetary system, seen until then as a sufficient monetary framework for the evolving European integration, was beginning to show signs of increasing instability. At the same time, tensions were mounting in Europe. In 1968, years of lower inflation in Germany than in France, combined with political unrest in the latter, led to major speculative attacks on the bilateral parity between the two major currencies and, ultimately, to a realignment in the following year.