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Email this citationCIAO DATE: 10/03
Whither Europe?
Barry Eichengreen
May 2003
University of California, Berkeley
Center for German and European Studies
Abstract
Europe has created a monetary union initially of 11, now 12, and soon an even larger number of member states, complete with a single currency and a European Central Bank. A monetary union on this scale is a singular achievement, something to which Asian and Latin American countries aspire but are unlikely to achieve anytime soon. It has allowed Europe to banish the problem of exchange rate instability and crises by eliminating intra-European exchange rates. Thus, its experience should allow us to identify the preconditions for attaining comparable levels of monetary and financial stability in other parts of the world. Finally, Europe is engaged in an unprecedented political experiment whose most visible manifestation is its constitutional convention. To be sure, Europeans have mixed feelings about political integration. They treasure their national identities. Sovereignty is jealously guarded, especially in the UK and the continent's smaller countries, where federalism is an f-word. At the same time, there are compelling reasons to contemplate the creation of stronger central institutions. A functioning single market requires EU-level regulation, in some domains at least, which in turn requires an EU political body with the power to hold economic policy makers accountable for their actions. This need is already evident in the case of the ECB, which is held only weakly accountable for its actions by a European Parliament with limited political powers. And, in a world with threats from terrorist networks and rogue governments, there will be a growing demand for an EU executive with the capacity to respond quickly to such dangers. But an EU executive with strong discretionary powers will be politically acceptable only if there exist political institutions capable of holding him accountable for his actions. Although the EU will not become a federation anytime soon, it will have to develop a political framework that allows for some pooling of sovereignty. To the extent that similar pressures will be felt in other parts of the world, Europe's political experiment deserves to be closely watched.
