ABSTRACT

From a global perspective, the European Monetary Union (EMU) offered its member states an enormous degree of freedom vis-a-vis the rest of the world as well as towards the international financial markets and the international multilateral organizations. This chapter draws on Keynesian and Marxist perspectives to show that the fundamental reason for the turmoil is the divergence of labour costs among member states, leading to huge gaps in competitiveness. Above all, Germany has suppressed labour costs, gaining a competitive advantage over other EMU members that has allowed it to emerge as the main creditor and effective leader of the union. At the core of EMU failure lies German economic policy as well as the inability of other European countries to force Germany to follow an alternative path. It is imperative to stress that a currency union is not a necessary part of the institutional arrangements that would allow the nations of Europe to coexist without friction and social destruction.