Extract

On 11 December 1991, the troupe rolled into Maastricht for the European Council meeting that would finally take the decision to recreate the European Community with a new treaty centred on the introduction of the economic and monetary union. Nations who joined the EMU would cede their currency issuing capacities to a newly created and independent European Central Bank, prevent that institution from playing a defensive role in times of crisis (‘monetary financing of deficits’) and agree to constrain their own fiscal freedoms to such a degree that they could no longer exercise their responsibilities to consistently maintain strong economic and employment growth. They also agreed to expose themselves to the whims of the private bond markets that existed only to make profits without regard for national goals such as full employment. The Council meeting effectively determined that the deflationary bias of the Bundesbank became the dominant policy paradigm for Europe at large, except that Germany’s export strength was not shared. The Germans and the Dutch held their position on the need for binding fiscal rules with sanctions for breaches. The British wanted no rules because they understood, correctly, that they compromised the democratic legitimacy of the national governments. There were curious conflicts among conservatives over this question.