Currency Unification in Europe

This research examines the potentialities and pitfalls of currency unification in Europe. Some of the history of the currency unification movement is discussed along with its economic and political ramifications. Special attention is paid to its impact on Germany.

Economic integration in Europe has been a major component of change in the Western world since the end of World War II. One of the ultimate goals of the regional arrangements is the establishment of a single currency and central bank among participating countries. Although trade barriers have been diminished, and labor and capital are relatively free to move about the region, the conditions necessary to establish a common currency have been difficult to meet.

The problems associated with currency unification are complex and involve a variety of interrelated institutional, economic, and political considerations. Foremost among these problems are the sheer number of currencies which would have to be unified. there is still no evidence to conclude that the European economic and monetary union (EMU) is either a certainty or that it is not likely to be realized. Of the potential membership (15 in number), Finland, Germany, Ireland, and Luxembourg appear to be strong candidates. Far several others--Greece, Italy, Portugal, and

In the present European multi-currency situation, there is a wide array of exchange rates between European currencies to take the strain of the economic imbalan

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other countries' expense (particularly Britain's expense). While a common currency would save transaction costs and make life somewhat easier for German exporters, it does not offer a long-term solution to Germany's structural economic difficulties. The French economy, German's major partner in the common currency project, has an economy which is in many ways in even worse shape. Germany's commitment to closer European unity is real and certainly involves some self-interest with the health of Germany's economy, but all other nations in the European Union are likely to benefit as well. A short while ago, the foreign-policy spokesman for the CDU/CSU faction in the German parliament had described the consequences and implications of monetary union as just as far-reaching as those of the erstwhile project of the prior European Defense Community (EDC). That historic effort, however, was shot down in 1954 in France's National Assembly. Chancellor Helmut Kohl has noted on several occasions that a similar failure in the present phase of monetary integration would set the process of European unification back by a generation, if not more. Unlike the case of the EDC--the failure of which was followed just a few months later by West German

Category: Foreign - C