ABSTRACT

When on Jan. 1, 1999 the European Economic and Monetary Union (EMU) enters its third and final stage by starting the monetary union (MU) between a majority of member countries the relations between the European Union and the rest of the world will also be severely affected. The structure of monetary and economic relations between the main capitalist countries will probably enter into a third large phase after the end of World War II. The first phase was that of economic reconstruction with economic policy priority on domestic growth and full employment within a framework of international monetary co-operation, the Bretton Woods system. In this system, the USA played the leading role and the US dollar served as na­ tional and world currency at the same time. The internal systemic contra­ dictions of such a construction and the policy of the USA undermined this system and lead to its collapse in the first half of the 1970s. The second phase was that of fluctuating exchange rates, greater financial instability as a consequence of the deregulation and liberalization of financial markets, to a slow-down of growth and a rise in unemployment in all OECD countries. Increasing internationalization took mainly the form of regionalization and regional block building while the US dollar remained - though contested several times - the dominant reserve medium for the world. In the EC, the European Monetary System (EMS) was introduced with the intent to form a

counterweight against the American monetary predominance, but it was quickly transformed into an instrument of German predominance in Europe. The third phase will be marked by the introduction of the euro as a poten­ tially strong challenger to the US $ in the world-wide currency competition. While it will by definition bring more stability into the monetary relations between the participating countries, by replacing their national currencies by one common currency, the effects upon the relations between the euro and third country currencies are very uncertain. This is true with regard to the other European currencies as well as with regard to the US $ and the Japanese Yen.