European Monetary Union: The Way Forward

European Monetary Union: The Way Forward

European Monetary Union: The Way Forward

European Monetary Union: The Way Forward


Analyzing the effects of a unified European currency and assessing the pressures of fixed exchange rates, this text combines extensive essays on monetary union with detailed case-studies of particular countries.


H.M. Scobie and T. Day

European Economics and Financial Centre, London

1 background

There has been a great deal of misconception and prejudgement on the outlook for the European single currency and its consequences in the future. Some foresee a great deal of unemployment emerging in the uncompetitive regions of Europe and particularly among the less industrially competitive states of the continent in the aftermath of the single currency.

The sceptics argue that without an adequate compensation scheme (for the newly unemployed) on the part of the European Union, the system of the single currency will be unsustainable. Since such a scheme of transfer payments by the eu does not exist, they draw up a disaster scenario and predict the collapse of emu.

The proponents of the doomsday scenario maintain that a regime of a single currency can only function and be ‘optimal’ if there exists the possibility and availability of a scheme of transfer payments from the central authorities (or the federal body) of a group of states with a common currency in circulation.

As a rule such sceptics quote the example of the United States where a common currency is implemented alongside a system of transfer payments, and the federal budget provides for all the regional unemployment. This, however, is a complete fallacy. in these cases, the us system of transfer payments is totally misquoted by the sceptics and the arguments put forward by such groups reveal a lack of familiarity with the unemployment benefit system in the us.

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