Question

explain the process of European monetary integration and discuss any mistakes which may have been made in the way it took place.

(Monetary union policy , the economic of Europe)

book Al-graa, Ali and Ardy, Brain(eds.) The European Union: Economics and Policies, Ninthe Edition (Cambridge University Press, 2011)

Answer 1

The European Monetary Integration was mainly started after the World War I. There were many new countries being formed as a result of the war. The intention was to have one currency in all the European countries. This would avoid the issue of exchange rates within the union.

However, Denmark and UK did not agree to this and continued to have their own currencies in circulation. During the Great Depression talks about a uniform currency was stopped. In 1950, Robert Schuman argued that the only way to ensure peace in Europe was to bind Europe as a single economic entity.

In 1951 Treaty of Paris was held and European Coal and Steel Community (ECSC) was formed between Belgium, France, Germany, Italy, Luxembourg and the Netherlands. The ECSC was then consolidated under the Treties of Rome into the European Economic Community (EEC).

Single European Act was passed in 1986 which completed in 1992. There were multiple currencies in the market and their unstable exchange rates lead to the formation of EURO currency. In 1998, the European Central Bank was formed to have conversion rates between member states currencies were fixed and Euro currency was created.

There were many committees were formed and meetings that were conducted. After a prolonged duration the European Union was formed in 2002.

- The time taken to make a single decision was too long.

- Some of the EU member countries did not have sufficient reserves to print Euros. By adding such countries the currency was devalued.

- Initially, each country should have been evaluated based on reserves, per capita and national income and then added to the union.

- Countries like Greece, Cyprus and Spain should have been excluded from the union. (As per my opinion).