Chapter

Towards a Federal Europe? The Euro and Institutional Change in Historical Perspective

Kathleen R. McNamara

in The State of the European Union, 6

Published in print September 2003 | ISBN: 9780199257409
Published online April 2004 | e-ISBN: 9780191600951 | DOI: http://dx.doi.org/10.1093/019925740X.003.0012
 Towards a Federal Europe? The Euro and Institutional Change in Historical Perspective

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This is the first of three chapters on salient EU policy innovations and expansion between 2000 and 2002, and it looks at European monetary policy (monetary integration) in light of the introduction of the Euro on 1 January 2002. McNamara compares the introduction of the Euro with historical cases of currency unification, and demonstrates why patterns of legal, political, and social authority creation at the supranational level must be taken into account to understand recent developments. The first section of the chapter briefly outlines the history of the Euro and EMU (European Monetary Union), and the second examines the potential for currency to act as an engine of institutional innovation and expansion by reviewing the literature on comparative political development, and generating a template for understanding the specific mechanisms that might link currency creation to political development. The third section situates this theoretical discussion within a historical perspective on monetary and institutional change, and the final section turns to a discussion of the potential future trajectory of the EU, asking whether the similar origins of currency consolidation are likely to produce similar results in terms of broader state‐building effects as described in the comparative political development literature. It is argued that the American historical example suggests the potential paths towards a federal Europe that the introduction of the Euro may portend, most importantly in terms of fiscal capacity.

Keywords: comparative political development; EU policy; Euro; European monetary policy; European Monetary Union; EU; federal Europe; institutional change; institutional expansion; institutional innovation; monetary change; monetary policy; political development

Chapter.  7366 words. 

Subjects: Politics

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