Banking on Union?

Whatever forms the debate about European political union may take--and public opinion in many places seems increasingly skeptical--the idea of a common currency and a common central bank without it is surely an illusion.

Issue: Winter 1995-1996

There has recently been sharp debate about that centerpiece of European Union (EU) planning, the European Monetary Union (EMU). In the run-up to the 1996 conference to review the EU's Maastricht Treaty--and leaving aside those who dislike the entire enterprise--three major schools of thought have emerged. One holds that not only a common market but even monetary union can be had without political unity. Monetary union, it is maintained, is a technical issue, designed to do away with exchange rate fluctuations, transaction costs for business, and other uncertainties. A new and independent European central bank could run such a regime, as independent central banks in Germany and the United States have done for decades, leaving political roles, including the management of national fiscal policies, unaffected.

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