European Monetary Union

The introduction of the euro in 1999 is without any doubt one of the great achievements in the European integration process. In one bold stroke, national monetary sovereignty was abolished and transferred to a new European institution, the European Central Bank, that from then on became the guardian of the new currency.Until the eruption of the sovereign debt crisis there was a general perception that the euro zone was a great success. In 2008 the European Commission issued a report (euro@10; European Commission. Europe@10. Successes and challenges after ten years of economic and monetary unions. Brussels, 2008) that was unqualified in its praise about the achievements of the euro zone. Then came the sovereign debt crisis that has led many observers to reevaluate European Monetary Union (EMU). This article discusses its successes and failures, analyzes the fragility of EMU, and identifies two sources of this fragility. Finally, it discusses governance issues and the nature of the political institutions that will be necessary to sustain the European Monetary Union.