How Much Political Union is Required for a Single Currency?

Abstract

The short answer to the title of this chapter is that not much is required but much could be chosen. Sharing a single currency does not appear relevant to many aspects of political union, such as military cooperation, foreign policy and so on. Instead the key aspect for politicians is the power to spend money: either raised from the citizens by taxes or borrowed, via the financial markets, from savers. Preserving that sovereign power to spend — but sensibly — is the challenge facing policy-makers in the approaching single currency system.