European Monetary Union: The German Political-Economic Trilemma. ZEI Discussion Papers: 1999, C 45

Staal, Eric Richard (1999) European Monetary Union: The German Political-Economic Trilemma. ZEI Discussion Papers: 1999, C 45. [Discussion Paper]

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Abstract

[From the Introduction]. There is no dearth of literature on Europe’s Economic and Monetary Union (EMU), a project invested with tremendous political and economic capital. The attention is deserved. Monetary union involves an unprecedented cession of national sovereignty. The creation of money is one of the most significant powers in the possession of national governing authorities. Even before EMU could be blamed for record levels of unemployment, it raised the ire of academic economists and invited political controversy. Particularly in Germany, public opinion has consistently opposed giving up the mark and expert opinion has been seriously divided. Opponents view EMU as an economically flawed policy that will consign parts of Europe to intractable underdevelopment and give traditionally more profligate foreign countries a finger on the trigger of German inflation. Notwithstanding the allure of political opportunism, since 1969 successive German governments of both major political parties vigorously pursued steps toward EMU. Even during Bundestag deliberations for ratification, the Maastricht Treaty on European Union (TEU) encountered remarkably few objections. There are doubtless many reasons for which German decision-makers have endorsed EMU. Standard explanations suggest that the Kohl government’s adherence to the detailed Maastricht agenda belied German national economic interest in currency stability. It is further argued that Bonn displayed reluctance during and after negotiations, but acquiesced for purposes of making German unification diplomatically more palatable to its West European partners. In short, German acceptance of EMU is attributed to an 'unification imperative.' The analysis herein challenges such claims. For Germany, European monetary union is no mere diplomatic expedient that comes at the cost of the national economic interest.

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