European Economic and Monetary Union
Essay by William David
August 2002
Topic:
The stability and compatibility, of the European Union structural economic model, post Maastricht.
Question:
Is Britain’s economic heritage and cultural ideology compatible with European Economic and Monetary Union and the euro?
Abstract – Aug 2002
The aim of this thesis is to explore the reasons for the structural differences of the principal European economies, created through historical cultural and economic evolution and to define Britain’s compatibility with European Economic and Monetary Union (EMU) and the euro. These differences demonstrate that the current British economy is structurally incompatible with the general model of the EU economy because of the distinctly British economic heritage and cultural ideology. As a result of these differences, Britain has chosen a more neo-liberal path than most of the other Member States who are reluctant to take the necessary steps to liberalize their economies and have instead, mistakenly chosen deeper integration through EMU as a solution.
In the case of regional cooperation, the fundamental principles of a successful economic integration model, cannot be achieved until a critical level of political consolidation had been reached. The problem with European EMU in its present form, is that it is seriously unstable, because community monetary policy as defined within the ESCB is too narrow and, without the critical necessary centralized co-ordination of fiscal policy, will result in an unbalanced and potentially fractious euro-zone economy. The principal cause of the instability stems from the Maastricht Treaty itself, which caused the citizens of Europe to question the purpose and direction of the union, which they then made clear in the problematic ratification process. This public unease and the difficult economic climate, has left EU leaders in the dangerous position of not having enough political capital to deliver the policies that are fundamental make EMU work. With consideration to the intrinsic instability of EMU and the historically divergent British economy, it would be economically, politically and socially disastrous for Britain to embrace EMU and the euro for the foreseeable future.