The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

European Monetary Union

  • Paul De Grauwe
Reference work entry


The introduction of the euro in 1999 is without any doubt one of the great achievements in the European integration process. In one bold stroke, national monetary sovereignty was abolished and transferred to a new European institution, the European Central Bank, that from then on became the guardian of the new currency.

Until the eruption of the sovereign debt crisis there was a general perception that the euro zone was a great success. In 2008 the European Commission issued a report (euro@10; European Commission. Europe@10. Successes and challenges after ten years of economic and monetary unions. Brussels, 2008) that was unqualified in its praise about the achievements of the euro zone. Then came the sovereign debt crisis that has led many observers to reevaluate European Monetary Union (EMU). This article discusses its successes and failures, analyzes the fragility of EMU, and identifies two sources of this fragility. Finally, it discusses governance issues and the nature of the political institutions that will be necessary to sustain the European Monetary Union.


European Central Bank (ECB) European Financial Stability Facility (EFSF) European Stability Mechanism (ESM) Euro Housing market Sovereign debt crisis Stability and Growth Pact 

JEL Classifications

E42 E5 E50 E52 G1 
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I am grateful to Iain Begg and Alison Howson for comments and suggestions.


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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Paul De Grauwe
    • 1
  1. 1.