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 2: Before the Euro: The First Steps in the Process of Monetary Integration

Chris Mulhearn and Howard R. Vane

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


2. Before the euro: the first steps in the process of monetary integration INTRODUCTION 2.1 Although the euro – launched on 1 January 1999 – represents a new phase in European monetary cooperation, the economic and political ideas behind the single currency in Europe have a lengthy history. The Werner Report (1970),9 adopted by the then original six European Economic Community (EEC) members in 1971, and named after Pierre Werner, the president and finance minister of Luxembourg who led the group that produced it, outlined a strategy to achieve monetary integration in Europe either through a single currency or irrevocably locked separate national currencies by 1980 – two decades before the birth of the euro. Although monetary union did not occur then, an examination of the Werner Report, its subsequent derailment, and the course of monetary cooperation in Europe in the interval prior to the birth of the euro is still instructive. The purpose of the present chapter is to outline the somewhat halting process of monetary integration before the euro. 2.2 THE BARRE MEMORANDUM The economic rationale behind the Werner Report was to provide a monetary means to cement together the markets of the ‘Six’ participants in the customs union established by the Treaty of Rome (1957). Werner was itself the culmination of a series of reflections on the nature of the relationship between the development of a unified market in Europe and the kind of wider policy framework that would support such a market. The basic concern here...

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