Economic Union
Economic Union in Europe
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Description of Economic Union
The Concise Publication of the European Union describes economic union in the following terms: [1] The launch
The launch of the euro in 1999 was the occasion of brief rejoicing at the triumph of faith over scepticism. But the currency soon began to stumble and by the end of the year it had fallen against the dollar by some 15% from its early high - an embarrassment to economically illiterate politicians who had rashly promised a strong currency, but a boost to industry within the eurozoneso long as domestic prices remained stable.
Of greater significance were the pointers to deeper issues. The expectation that the single currency would lead to intensified Community encroachment on national economic self-government was quickly corroborated by Continental calls for tax harmonisation, including a German-backed proposal for an EU-wide withholding tax. This proposal was opposed by Britain on the grounds that it would threaten London's pre-eminence in international capital markets.
The problems inherent in a 'one-size-fits-all' interest rate were soon highlighted by a surprisingly sharp divergence in the EU's economies. Meanwhile, the UKcontinued to thrive outside the eurozone, and as fears of the consequences of isolation receded, British resistance to the euro increased. The Chancellor of the Exchequer, Gordon Brown, found himself excluded from Euro-X, the council of Euroland finance ministers. But independence had its consolations. While the UK retained its seat at the global summit meetings of the 'Group of Seven' nations, the central banks of France, Germany and Italy resigned themselves to being represented there by the ECB. For all the constructive language of the Blair government about the EU, the impression grew that Britain's economic path was drifting apart from the Continent's under the pressure of events.
On the positive side, the euro had been brought in without a technical hitch and the ECB had settled to its task in a professional manner. If there was a certain lack of cohesion between a centralised monetary policy and the decentralised management of national economies, this was to be expected and was not on a scale to cause concern. The euro might be an initial disappointment to savers and investors, but it had established itself as a major borrowing currency and a liquid instrument in markets - markets which, ironically, gravitated instantly to London. In Sweden and Denmark there were indications of a renewed wish to adopt the single currency. The arguments for and against EMU had vied with each other for 30 years: twelve months' practical experience was far too short to resolve the debate. Indeed, it was possible that both sides would eventually be able to claim victory. The Continent might end up with a viable euro area, amounting effectively to an extension of the previous D-Mark zone, while Britain, with its unique trading and investment patterns, its different economic cycle and its fierce attachment to self-government, might flourish best with its own currency. Whatever the final outcome, it was certain to define much of the EU's fate for decades to come. (See also Single currency.)
Resources
Notas y References
Based on the book "A Concise Publication of the European Union from Aachen to Zollverein", by Rodney Leach (Profile Books; London)
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