Past, Present and Future
Edited by Eric J. Pentecost and André Van Poeck
Chapter 8: ERM-II: Problems for the ‘Outs’ and their Relationship with the ‘Ins’
Heather D. Gibson and Euclid Tsakalotos 1 INTRODUCTION March 1998 saw the publication by the European Commission and the European Monetary Institute (EMI) of two independent reports on convergence of European Union (EU) countries (in relation to the provisions laid down in the Maastricht Treaty). On the basis of these reports on the extent to which individual EU countries met with the convergence criteria, ECOFIN (the Council of EU Finance Ministers) decided in May 1998 which countries were eligible to join the European Monetary Union (EMU). At the same time, the exchange rates for EMU entry were also announced. As a consequence of this decision, the situation in the EU has been very different since 1 January 1999. Most member states participate in the eurozone and the common monetary and exchange rate policy (the ‘ins’) but there are those which do not (the ‘outs’). The purpose of this chapter is to examine the relationship between the ‘ins’ and the ‘outs’ and, on the basis of past EU experience, suggest the kinds of problems which the ‘outs’ in particular might be expected to face. Our account here will, by necessity, touch upon many well-known debates and controversies concerning how best to arrive at monetary union. For instance, take the issues at stake between the so-called ‘economists’ and ‘monetarists’. The former have usually argued that monetary integration should be preceded by economic and economic policy integration, with ﬁnancial integration – the removal of all capital controls and completely ﬁxed exchange rates – as the...
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