Will EMU Come as Intended and on Time

Abstract

My task is to predict whether or when European monetary union (EMU) will be realised, and to explore Germany’s role in the drive to implement the Maastricht’s Treaty’s programme to create a single European currency. Positivism tells us that prediction is the other side of the coin labelled explanation — if you can do one, you can do the other. Yet social science’s record of predicting events is notoriously poor. Furthermore, as Eichengreen reminds us, ‘there are no precedents for Europe’s current course, in which countries with histories of monetary sovereignty and long-standing central banks establish a common central bank accountable to them jointly with control of their national monetary policies, including the power to issue a common currency’.¹ Hence we have no cases, large or small, to draw upon as we anticipate the path of monetary union over the next few years. I shall nevertheless attempt to chart the likely developments in monetary union through the last year of the 1990s and into the next century. In doing so, I shall liberally apply the standard set of equivocating tools of social science, including ‘ceteris paribus’, ‘straight-line projection’ and the like.

The author wishes to acknowledge assistance from Wolfgang-Uwe Friedrich and Gerald Kleinfeld.