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This chapter examines how the creation of the Economic and Monetary Union (EMU) spawned a new political economy of adjustment in Europe. It is argued that the EMU is changing how Europeans adjust to other economic developments. These changes in European patterns of adjustment will affect the stability of the EMU.

The Economic and Monetary Union (EMU) resulted from the convergence of ideas about the aim of monetary policy and the design of EMU. It will lead to a further revival of the EU if there remains a clear consensus and widespread support for common ideas on the objectives of economic and monetary policy. On the other hand, the EMU may pose a serious risk to the integration process if its costs and benefits are unevenly spread across EU member states, sectors, regions, and citizens.

This chapter presents a brief history of the economic and monetary union (EMU) in Europe, and examines its implications for the future of European integration. It argues that the EMU is a high-risk strategy, given the combination of fixed exchange rates and ‘one-size-fits-all’ monetary policy with very weak adjustment mechanisms and economic divergence. If managed badly, the EMU would have a negative effect on output and employment for the EU as a whole. The success of the EMU rests on a stronger and more integrated EU in both political and economic terms, as well as major structural reforms.

This chapter first briefly traces the history of European monetary integration. It then examines: the politics and economics of the Maastricht Treaty and Economic and Monetary Union/European Monetary Union (EMU); the convergence criteria and the transition to the final stage; and the institutional structure provided for in the treaty. It concludes with the main outstanding issues, drawing on the experience of the first two years of life with the euro, and the prospects for the future.

The battle of the systems within the EU is as lively as it ever was, if not livelier. Europe is not converging on a single capitalism, but the many national forms it takes are all subject to similar forces. There is convergence in the processes at work in the world and in Europe — the complex processes often summarized as ‘globalization’ — but there is continued divergence in national structures. Convergence with the USA is otherwise taking place for political reasons, since the euro is working as a neo-liberal engine.

This chapter analyzes alternative strategies—multilateral and regional—pursued by the Central Asian countries to integrate into a wider economic circle, emphasizing the shift from being part of the highly integrated Soviet economy to regional disintegration in the 1990s and early 2000s and then, after 2006, steps towards greater cooperation and integration. In the 1990s and 2000s, despite the actual multilateralism, only the Kyrgyz Republic joined the World Trade Organization. At the same time, a number of regional agreements were signed, both among the Central Asian countries and between Central Asian countries and their neighbors, although none had much influence, until the Eurasian Economic Union was constructed after 2009. Meanwhile, high costs of international trade in Central Asia are a symptom and a cause of regional disintegration.

This chapter discusses the preparation for the negotiations on Economic and Monetary Union (EMU) in Europe. The preparations included the authorization of preparatory work in 1988, the production of the Delors Committee Report in 1989, the approval of the Report at Madrid, and the finalization of the agreement for an Intergovernmental Conference (IGC). Various events, including the Gulf War and the German Unification, affected the EMU negotiations. This made the Common Foreign and Security Policy a more important issue in the IGC.

This chapter yields at the outset that no single explanation is sufficient to explore the Maastricht phenomenon. The claim is, merely, that the adopted realist perspective is the single most convincing approach to what for many observers—and especially those from outside Europe—is a genuine intellectual puzzle. This puzzle contains two distinct dimensions: the timing of European Union and in particular European Monetary Union, and the fact that deep economic and political union between disparate states has only occurred in Europe. An overview of the remaining chapters is provided as well.

Although John Major was born during World War II, he was a child of post-war Britain. Unlike Margaret Thatcher, who was already a teenager when war was declared, Major had no visceral fear of what a reunited Germany might do. He did not share her sense of a Britain which, almost alone, embodied the values which he held dear. Major did not wish, as the new Prime Minister, to change the fundamentals of Britain's European Union policy. The substance of policy would remain robust but the approach and presentation would change. Major wanted to be active in making a success of Britain's EU membership. He did not share his predecessor's view that all the problems of his lifetime had come from Continental Europe. He wanted to rebuild the relationship with Helmut Kohl which had had to be kept alive by Douglas Hurd in the last part of Thatcher's premiership. One month before the Maastricht European Council, Major set out his vision of an enlarged European Community.

Nigel Lawson, the British Chancellor, viewed Margaret Thatcher's agreement, at the Hanover European Council in June 1988, to a committee to examine the Economic and Monetary Union (EMU) as a disaster. Lawson was always in favour of Britain's membership of the exchange rate mechanism and against EMU. Michael Butler, by now working for Hambros in the City, set up a City Committee to monitor the whole issue of EMU and the work of the Delors Committee, and himself began to advocate a scheme which was the brainchild of a brilliant young economist at Midland Montagu, Paul Richards. Known as the hard European currency unit, the idea was to replicate the rigour of the deutschmark in a common currency, rather than a single currency. The British government did not immediately warm to the scheme, with some long-term costs. Thatcher would be eventually succeeded by John Major as British Prime Minister.

This chapter discusses legal aspects of the Economic and Monetary Union (EMU). Topics covered include EMU and capital movements, EMU and differentiated integration, monetary policy, and economic union. The EMU shows that there can be exclusive Community competence in relation to a group of Member States rather than the Community as a whole, and it also shows that rules relating to the group have been extended to the Community as a whole through the use of Article 308. It has created a new institutional structure, with an apparently enormous degree of independence, which has been tempered by a judgment of the ECJ. In the context of economic policy, it has created new enforcement machinery, based on what some would regard as a rather arbitrary choice of figures for government debt and deficits.

This chapter looks at the national economy and transition strategies of the Kyrgyz Republic. The Kyrgyz Republic was the most explicit of the Central Asian countries in attempting a rapid transition from central planning. Economic performance was, however, disappointing due to limited resources and poor institutions. The country became highly dependent on revenues from a single goldmine, Kumtor, while other mineral and hydro resources remain poorly developed. The biggest symptom of economic distress was the rise in number of Kyrgyz migrating to Russia for work; by the end of the oil boom, the numbers were commonly thought to be around a million people and in 2014, the Kyrgyz Republic's remittances to GDP ratio was the third highest in the world. This left the country susceptible to Russian pressure to join the Eurasian Economic Union, which it did in 2015, and vulnerable to downturns in the Russian economy.

Two months before what Margaret Thatcher saw as the Milan ambush, the British Foreign Office had sent her a paper about the implications of Spanish and Portuguese accession to the European Community. The dramatic economic impact of enlargement was only partly foreseen. The paper noted that the reasons which had led the existing member states to support the accession of Portugal and Spain were almost entirely political. The Community was likely to develop its own ‘north/south’ divide. The Foreign Office foresaw the emergence of core groupings — more probably as a series of concentric circles than as a single cohesive group. Pressure for reform of the Common Agricultural Policy (CAP), untouched by the Single European Act, remained a big British preoccupation. Once again, the European budget was bumping up against the ceiling, so Britain had leverage to secure CAP reform.

This chapter discusses the highlights of the Intergovernmental Conference (IGC) debate on the EMU, which lasted for the whole of 1991. The IGC focused on refining the draft Common Foreign and Security Policy contained in the Italian Presidency Report of November 1990 and the Rome European Council of December 1990, and on discussing two major issues of principles. These issues are about the extent to which the Community's foreign policy should be assimilated to EC mechanisms and procedures, and how far the Community should go in developing its own defence and security capabilities.

This introductory chapter takes a look at the course from single market to economic union. It discusses work that reflects the contribution John Usher made to EU legal scholarship, such as the legal implications of monetary union and of flexible integration. This work is divided into five main headings, namely economic and monetary law and policy, the evolution and regulation of the internal market, common horizons, expanding horizons, and judicial protection and access to justice. The rest of the chapter summarizes this work and identifies common themes that connect various policy areas together in unexpected ways.

This chapter begins by discussing the economic and constitutional assumptions that underpinned the Maastricht settlement concerning economic and monetary union (EMU). It then turns to the EU financial crisis and the responses to the crisis. While these responses are complex and varied, two kinds of measures are discernible: those designed to assist Member States in economic difficulty, and those aimed at increasing supervision over national budgetary policy. These measures are analysed, including the legal difficulties attendant upon them. This is followed by consideration of additional measures to be enacted in the light of high-level deliberations as to what is required for a ‘genuine economic and monetary union’. The chapter concludes with an assessment of the broader political, economic, and legal consequences of the crisis for the EU and its relationship with the Member States.

The customs union is one of the important elements of the common market that was established by the European Economic Community (EEC) Treaty. However, the concept of the common market has now disappeared from the Treaty on the Functioning of the European Union (TFEU). This chapter identifies some of the problems — internal and external — in the performance of the customs union and how they have been and are being addressed. This chapter determines that the performance and practice of the internal market and customs union show that in the EU they are linked concepts that form relevant elements of the construction of the EU. It also addresses the existential dependency question with regards to the relationship between the economic union and the EU's persistence.

The national economy of Portugal was exposed to financial and political crises that proved to be recurrent, and an inflationary environment when Portugal became a member of the European Community in 1985. When Cavaco Silva became prime minister, he was able to secure a huge part of parliament in the general elections that occurred in 1987 and 1991. A multi-annual fiscal adjustment strategy (MAFAS) was employed since his government implemented certain reforms. While this measure could be associated with the ECU, the financial and political stability brought on by such measures continued through the efforts of the socialist party which articulated a commitment towards the Economic and Monetary Union (EMU). The escudo exchange rates and interest rates reflected the sustained convergence that was expected through the 1992 Treaty on European Union. This chapter looks into how multilateral measures for surveillance imposed by the ‘code of conduct’ of the Exchange Rate Mechanism of the European Monetary System (ERM) improved national credibility.

Economic and Monetary Union (EMU) embodies an approach to policy-making that is both highly centralized and highly decentralized. In the monetary sphere, member states share a single monetary policy, but national central banks play a key role in the decision-making structures of the European Central Bank. In the economic sphere, member states retain the final say over the formulation and implementation of fiscal policies. This chapter explores the origins of this paradoxical approach to policy-making and its implications for the smooth functioning of the single currency. Its central argument is that EMU’s institutional design is the result of pulling and hauling between national central banks on the one hand and national governments on the other. Though the euro area faces pressure to centralize economic policy in the light of the global financial crisis, the intergovernmental bargain on which EMU rests shows few signs of shifting in this direction.