Making the European Monetary Union

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Harold James explores the complexities of Europe’s financial crisis, arguing that it cannot solely be attributed to the Euro. Instead, the crisis stems from unresolved issues dating back to the Euro's inception. Since the 1960s, Europe sought to tackle two main challenges: the dollar's dominance in the global monetary system and Germany's ongoing current account surpluses. The Euro was established with a politically independent central bank focused on price stability, yet essential stability factors, such as fiscal rules and banking supervision, were left to individual member states. This oversight contributed to the crisis decades later. The narrative delves into behind-the-scenes negotiations, drawing on previously unavailable sources from the European Community’s Committee of Central Bank Governors and the Delors Committee of 1988-89, which outlined the path to monetary union. The study emphasizes the ongoing tension between politicians and technocrats in shaping the Euro, suggesting that this dynamic will persist regardless of the currency's fate. Through this analysis, readers gain a deeper understanding of the European monetary crisis and its historical context.