The Euro

The Euro

Its Origins, Development and Prospects

Chris Mulhearn and Howard R. Vane

This important new book provides a non-technical, comprehensive overview of the central issues surrounding the euro. Following an introduction to the origins of European integration, the authors proceed to examine the first concrete steps in the process that led to the creation of the euro area. The book then explores the economics and architecture of the euro, highlights the issues surrounding enlargement, and reflects on the future of European monetary union. To help bring the subject matter alive, the book also contains interviews with leading academics in the field including Willem Buiter, Nick Crafts, Paul De Grauwe, Patrick Minford, Niels Thygesen, Andrzej Wojtyna and Charles Wyplosz.

Chapter 1: The Euro and the Origins of European Integration

Chris Mulhearn and Howard R. Vane

Subjects: economics and finance, financial economics and regulation, international economics, money and banking


INTRODUCTION The euro was launched on 1 January 1999. At the time it was unclear how this ambitious monetary integration project would fare, and there were many grave warnings that it could easily fail. But this did not happen. Indeed, the new currency’s emergence was, by any standards, a relatively smooth and comfortable process. This is all the more remarkable because the euro is shared by neighbouring countries that, within living memory, have engaged in the brutal, prolonged and industrialized destruction of each other’s populations. Today, war between the nations of Western Europe is absolutely unimaginable and the enmities that once existed have given way, not just to a permanent peace between independent countries, but to deep, shared sovereignty over a range of crucially important economic and political processes. The euro is both the most evident symbol and the deepest material form of this shared sovereignty. Figure 1.1 depicts the extent of the euro area which presently comprises 15 economies: the 11 that adopted the currency at the time of its launch, plus Greece and Slovenia, which joined in 2001 and 2007 respectively, and – since 2008 – Cyprus and Malta. Currently, the European Union (EU) has 27 members, so the euro area still has considerable scope for enlargement. Table 1.1 sets the euro area in an international context. Although it has a larger population than the United States and Japan – the two other members of the so-called ‘triad group’ of the world’s three largest economies – in GDP terms the euro area...

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