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EMU: a future that works?

Charles Goodhart
  20th December 1995  —  Issue 3
In December Europe's national leaders meet in Madrid to prepare for the 1996 inter-governmental conference. Monetary union will be high on their agenda. As differences widen over the likelihood, timing and desirability of a single currency, Charles Goodhart provides a progress report

Europe’s progress towards monetary union is turning into an epic voyage. Ever since the course was charted in the Maastricht treaty in 1992, winds threatening to blow the whole project off course have been rising. First the markets ejected sterling and the Italian lira from the exchange rate mechanism (ERM); more recently the French franc has looked perilously vulnerable. In the meantime it has become abundantly clear-so clear that it has even been admitted by some national politicians-that certain member states (such as Italy) will fail to meet the convergence criteria laid down in the treaty. In addition to this, popular sentiment in many countries appears to be antagonistic to the objective itself: although a majority of Germans still favour closer European union, nearly two in three oppose a single currency.

Yet the higher the seas rise, the more determined are most European politicians to stick to the course. The signs are that they will lash themselves to the mast at the summit in Madrid: the “reference group” charged with preparing for the summit has reported “unanimous agreement” on maintaining both the timetable and the convergence criteria laid down at Maastricht.

Can the the member states’ national governments make it happen by sheer force of political will? More to the point, if it does happen, will it work?

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By Charles Goodhart

Charles Goodhart is emeritus professor of banking and finance at the LSE. He was one of the original members of the Bank of England monetary policy committee

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