Index 177. towards expanding EMU to the East, 163

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2 174 Bibliography Eichengreen, Barry (2000) The Political Economy of European Monetary Unification (New Haven, CT: Westview Press) Eichengreen, Barry and Ghironi, Fabio (2001) EMU and Enlargement, Conference paper, European Commission, March. European Central Bank (2001) Review of the International Role of the Euro, Special paper. European Central Bank (2001) The Monetary Policy of the ECB (Frankfurt). Fabius, Laurent (1995) Les Blessures de la vérité (Paris: Flammarion) Feldstein, Martin (1997) The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability, Journal of Economic Perspectives, 11(4): Feldstein, Martin (2000) The European Central Bank and the Euro: The First Year, NBER Working Paper No. 7517, February. Fratianni, Michele and Spinelli, Franco (1997) A Monetary History of Italy (Cambridge: Cambridge University Press) Fitoussi, Jean-Paul (1994) Le Débat interdit: Monnaie, Europe, Pauvreté (Paris: Arléa diffusion Le Seuil) Frowen, Stephen and Pringle, Robert (1998) Inside the Bundesbank (London: Macmillan) Garber, Peter and Spencer, Michael (1994) The Dissolution of the Austro- Hungarian Empire: Lessons for Currency Reform, Essays in International Finance No. 191, Princeton University. Gedmin, Jeffrey (1999) Helmut Kohl, Giant, Policy Review, No. 96, Washington, DC: Heritage Foundation. Hartmann, Phillip and Issing, Otmar (2002) The International Role of the Euro, Journal of Policy Modeling, 24: Holsman, Robert (1996) Maastricht: Monetary Constitution Without a Fiscal Constitution? (Baden-Baden: Nomos) Issing, Otmar (2001) The Single Monetary Policy of the European Central Bank: One Size Fits All, International Finance 4(3): Issing, Otmar and Gaspar, Vitor et al. (2001) Monetary Policy in the Euro Area (Cambridge: Cambridge University Press) Jones, Erik (2002) The Politics of Economic and Monetary Union: Integration and Idiosyncrasy (Lanham, MD: Rowman & Littlefield) Jonung, Lars (2002) EMU and the Euro: The First 10 Years, Economic Papers, No. 165, February 2002 (European Commission, Directorate-General for Economic and Financial Affairs) Lacouture, J. (1999) Mitterrand: Une histoire de François (Paris: Seuil) Leaman, Jeremy (2001) The Bundesbank Myth (Basingstoke: Palgrave Macmillan) Madelin, Philippe (1998) Jacques Chirac: une biographie (Paris: Flammarion) Marsh, David (1992) The Bundesbank: The Bank that Rules Europe (London: Heinemann) Martinet, Gilles (2002) Les Clés de la Cinquième République (Paris: Seuil) Meier, Gert (1997) Das Ende der D-Mark: Vision oder Wahn (Frankfurt: Gie-Tübingen) Meyret, Romain (1994) La Face cachée de Jacques Delors (Paris: Édition Première Ligne) Miard-Delacroix, Hélène (1988) Partenaires de Choix? Le chancelier Helmut Schmidt et la France (Frankfurt: Peter Lang) Milesi, Gabriel (1997) Jacques Delors; L homme qui dit non (Paris: Édition No. 1)

3 Bibliography 175 Muet, Pierre-Alain and Foneneau, Alain (1987) Reflation and Austerity: Economic Policy under Mitterrand (Oxford: Berg) Mundell, Robert A. (1994) The European Monetary System 50 Years after Bretton Woods. Paper presented at Project Europe 1995, Sienna, November. Mundell, Robert A. (1998) The Euro and the Stability of the International Monetary System. Paper presented at Luxembourg Institute for European and International Studies, December. Muns, Joaquim (1998) Spain and the Euro: Risks and Opportunities (Madrid: La Caixa) OECD (1999) EMU: Facts, Challenges and Policies (Paris: OECD) OECD (2000) EMU One Year On (February) OECD (2003) Economic Survey, Euro-Area (Paris: OECD) Paolo, Francesco (2002) New views on the Optimum Currency Area Theory: What is EMU Telling Us? ECB Working Paper No. 138, April. Péan, Pierre (1994) Une Jeunesse Française (Paris: Librairie Arthème Fayard) Pentecost, Eric J. and van Poeck, André (2001) European Monetary Integration; Past, Present and Future (Cheltenham: Edward Elgar) Pruys, Karl Hugo (1995) Helmut Kohl; die biographie (Berlin: edition q) Rasin, A. (1923) Financial Policy of Czechoslovakia during the First Year of its History in J.T. Shotwell (ed.), Economic and Social History of the World War (Oxford: Clarendon Press) Ross, George (1998) French Social Democracy and the EMU, ARENA Working Papers No. 19. Sauzay, Brigitte and von Thadden, Rudolf (1999) Mitterrand und die Deutschen (Göttingen: Wallstein) Schäuble, Wolfgang (2000) Mitten im Leben (Frankfurt: Bertelsmann) Szăsz, André (1999) The Road to European Monetary Union (Basingstoke: Macmillan) Vantoor, Wim (1997) European Monetary Union since 1848 (Cheltenham: Edward Elgar) Verdun, Amy (1998) The Role of the Delors Committee in the Creation of EMU: An Epistemic Community?, European University Institute, Working Paper RSC No. 98/44. Wiesel, Ēlie (1995) Mémoire à deux voix (Paris: Fayard) Woodward, Bob (2000) Maestro: Greenspan s Fed and the American Boom (New York: Simon & Schuster) Woyke, Wichard (2000) Deutsche-französische Beziehungen seit der Wiedervereinigung (Opladen: Leske & Budrich) Wyplosz, Charles (1997) EMU: Why and How It Might Happen, Journal of Economic Perspectives, 11(4): Wyplosz, Charles (1998) Towards a More Perfect EMU. Paper given at symposium of Money and Credit, Madrid, November 1998.

4 Index Accounting tricks, their use towards pushing the EMU train towards its final destination, Adenauer, Konrad, influence on Helmut Kohl, 7, 36; his relations with de Gaulle, 29 Alphandéry, Edmond, as monetary nihilist, 23 Anchor currency, the Deutschmark as, 3; the French franc unsuitable as, 3, 9 10; the US dollar as, 7; revulsion against US dollar as, 7; see also Deutschmark; French franc Anti-Americanism, as illustrated by Delors, 43; Schroeder s use of, 28; see also anti-anglo Saxon sentiment Anti-Anglo Saxon sentiment, see Barre, Raymond; Juppé, Alain; Delors, Jacques and Villepin, Dominique de Austro-Hungarian monetary union, its dissolution, 66 7 Attali, Jacques, 38 Baden-Württemberg elections (1996), SPD does badly on a euro-sceptic ticket, 134 Balassa hypothesis, its application to potential inflation in East European countries if they join EMU, 162 Balladur, Édouard, as counsellor to Pompidou, 45; as counsellor to Chirac, 45; as finance minister in Chirac government , 107; role in Louvre Accord, 1987, 110; launches diplomatic initiative in favour of European Central Bank in late 1987 and early 1988, 42, 109; as French Prime Minister, , 123; promotes Trichet, 58; why he accepted Trichet s advice not to ease radically monetary policy in summer 1993, 125; his attempt to win pro- Europe catholic vote by adopting pro-emu stance, 110; his betrayal by Trichet at critical stage of 1995 presidential election campaign, 58; may not have embarked on a sharp tightening of fiscal policy in late 1995 if he had been elected president, 126; not a convinced supporter of a single currency in Europe, 126; his relations with Kohl less good than those of Chirac, 126 Banking crisis, as a trigger to exit from EMU, 65; as a danger during a process of separation from EMU, 82 Banknotes, how to deal with in a disintegration of monetary union, 64, 66, 70, 73, Barre, Raymond, sent by de Gaulle to Paris in 1967, 97; anti-anglo- Saxon sentiments, 33, 98; as early architect of plans for European monetary integration, 97 9; view that exchange rates can be fixed before economic convergence achieved, 98 9; sees no benefit in currency devaluation, 98; 105; persuades de Gaulle against devaluation at end 1968, 99; against tough anti-inflation monetary policy ( ), 10, 104; basic inconsistencies in his economic policy, , 104 5; as co-founder of European Monetary system, 98; rejects monetary squeeze as a means of ending inflation, 104; his challenge to Chirac in 1st round of

5 Index 177 Barre, Raymond continued presidential elections a factor in triggering pro-emu initiative by Finance Minister Balladur in Winter 1987/8, 110; argues in favour of EMU delay (Spring 1996), 133 Basel Accord (1972), 101; see also Snake Belgium, importance of Walloon Flemish divide to determination of its currency policy, 11 Bérégovoy, Pierre, his support for a freely floating franc in 1983, 12; as Mitterrand s chief of staff , 12; as Anglophile, 33; pursues a hard franc policy, , 120; distrustful of Germany in pre-maastricht negotiations, 59; favours a common rather than single European money, 33; his differences of opinion with Mitterrand over monetary union, 33; participation in French referendum on Maastricht Treaty, 5 Biarritz meeting (January 1990), Kohl and Mitterrand patch up differences and agree on next moves towards European Monetary Union, 116 Bundesbank, French ambitions to eclipse its power, 4; successful attack on inflation, , 10; the importance of its head under the new regime of EMU, 26; sold by Chancellor Kohl? 32; annual report in Spring 1988 states that monetary union not necessary for Single Market success, 50; publishes its pre-emu report (March 1998), 135; counterfactual case of how, if independent, it would have behaved in the early 2000s, 144; attempt to argue retrospectively that DM was not overvalued when converted into euros, 130; cautious attitude towards expanding EMU to the East, 163 Camdessus, Michel, how Fabius was taken in by his questionable advice in 1983, Catholicism, a force behind European monetary union? 45; pro-europe Catholic centre a critical battle ground in France between Socialists and Gaullists, 110; as a factor in Delors view of Europe, 44; Mitterrand s awareness of Delors role in gaining Catholic centre votes, 41; Barre and Chirac fight for pro-europe Catholic vote in first round of Spring 1988 presidential election, 110; Balladur s attempt to win Catholic centrist vote by adopting pro-europe stance, , 110, 124; Mitterrand s Catholic upbringing, 30; Tietmeyer s Jesuit education, 54; Villepin s combative Catholicism, 47 Cheysson, Claude, rejected by Kohl as possible EC Commission head, 32 Chirac, Jacques, his early opposition to Europe, 45; origins of his close relationship with Kohl, 45; as long-time supporter of German unification and the German people, 45; aim is a Europe for France, 46; signs Single Europe Act (1987); coalition agreement in 1986 not to take new steps towards European monetary union, 109; fear of challenge from Barre in 1988 presidential elections pushes Chirac to favour initiative in favour of European Monetary Union by his finance minister (Balladur), 110; decision to back Maastricht Treaty, 46; his promotion of Alain Juppé and allegations of their joint role in corruption at Paris City Hall, 46; choice of Villepin as chief of

6 178 Index Chirac, Jacques continued staff, 47; nuclear tests set back his European diplomacy in Summer 1995, 128; seeks reassurance from Kohl, Autumn 1995, about Germany s commitment to EMU, 127 8; decides against any bold challenges to German dominance in run-up to EMU (1995 7), ; puts Trichet forward as candidate for ECB president, 49, 135; did Chirac prove to be a more reliable driver of the EMU train than Balladur would have been? 126 Connolly, Bernard, his witness account of Tietmeyer s stance at ERM crisis meeting, July 1993, 124 D Estaing, Giscard, as a co-founder of the European Monetary System, 50; what if he had won the 1981 presidential election? 104; offends Kohl, 107; incapable of conciliatory gestures towards Germany? 107; fear that Mitterrand might appoint him as prime minister a factor in Chirac s decision to back Maastricht Treaty in referendum? 46; backs Chirac against Balladur in 1st round of 1995 presidential elections, 126; argues in favour of EMU delay (June 1996), 133; annoys German opinion by revealing in early 1997 that the end of the Deutschmark had long been a strategic aim of France, 134 De Gaulle, Charles, his ambitions for French financial power, 8; his relations with Adenauer, 29; sends Barre to Brussels in 1967, 97; his distrust of Brussels experts, 98 Default on government debt, a trigger for exit from EMU, Deflation, how a small country (for example Netherlands) can escape this by pulling out of EMU, 161; proposal for a Stability Council which would authorize emergency measures in state of deflation alert, 166; risk of deflation trap rises on joining monetary union, 22; founders of EMU failed to imagine problem of, 61 Delors, Jacques, his early career, 39 40; his first job in a Gaullist Administration, 40; why he rejects a tie-up with moderate socialists under Rocard, 40; as member of European Parliament and chairman of its monetary committee, , Mitterrand never overlooked past slights by Delors, 40; his jealousy of Fabius, 40; attittude of Delors towards Mitterrand, 41; as finance minister launches attack on French inflation, 10; 40; not inclined to save socialism in France, 12; appointed as president of EC Commission, 1984, 13, 108; appoints himself as EC Commissioner for Monetary Affairs, 108; his launching of the Single Market Programme, 1985, 13, 108; his special relationship with Kohl, 31, 37, 41 2; what made him run? 38 45; uses crisis ERM meeting in March 1983 as a theatre for effecting U-turn in economic policy, 106; understands importance of abolishing exchange restrictions as condition for progress on European Monetary Union, 108; astute picking of Lord Cockfield as Commissioner to please Margaret Thatcher, 108; taken by surprise at the sudden pro-emu moves from France and Germany in early 1988, 42; his vision for European socialism, 39; suspicious of markets, 40; his Catholicism, 41, 44; tells German

7 Index 179 Delors, Jacques continued youth to be proud of their fatherland, 41; supports expansion of European Community to Eastern Europe, 41; his looking up to the German model, 40; welcomes German unification and eases access of East Germany to European Community, 41; countenances failure to reach EMU following 1993 crisis, 123; sees EMU as essential to avoiding the marginalization of France, 43 Delors Committee, set up at Hannover Summit, 38, 111; why predominantly composed of central bankers, 42; designs blueprint for monetary union, ; Hoffmeyer s view that none of its members expected monetary union in their lifetime, 38 Democratic process, how to respect during separation from monetary union, 80; how to introduce at the European Central Bank, Deutschmark, why Austria, Belgium, Netherlands would choose as anchor currency, 3, 9 10; why its anchor role came under threat in 1990s, 7; a freely floating DM would have depreciated in late 1990s and early 2000s, having appreciated in early 1990s, 11, 118; how the German economy suffered in the early 2000s from its loss, 23; a possible reincarnation, 86 9; was it overvalued when converted into the euro at end-1998? 84 Disintegration of European Monetary Union, why no provisions for in the Maastricht Treaty? 63 4; a suggested set of principles to be agreed on disintegration, 64 5, 167; how clear principles for leaving monetary union could be used to strengthen constraints on fiscal policy without need for Stability Pact, 155; various disintegration scenarios, 65 6; forced versus strategic exits, 65; lessons from the break-up of Austria-Hungary, 66 7; an illustration of slow-stage withdrawal from monetary union (hypothetical case of UK leaving EU), 68 75; a rapid strategic exit to escape deflation or inflation, 75 83; exit induced by regional slump, 83 86; special case of German threatened separation, 86 89; total dissolution and rebirth of ecu, 89 92; forced exits by Eastern European countries, 93 4; existential and territorial risks as features of the euro, 96; absence of political union and shrinking idealism about Europe endanger monetary union from a long-run perspective, ; continued existence of national central banks a source of existential risk in euro, 142; will a small country be the first to leave EMU? 160 2; see also reform proposals for European Monetary Union Duisenberg, Wilhelm, his subservience as President of Dutch central bank to Bundesbank policy bolstered German monetary hegemony, 11 13; his nickname in Paris of Mr Five Minutes, 12; as pumppriming Dutch finance minister in 1970s, 18; his rejection of the floating alternative for the guilder, 18 19; his flawed criticism of the guilder s minidevaluation in 1982, 19; his insistence on maintaining guilder s tight link to the DM helps Tietmeyer to rebut French plan for a temporary exit of Germany from the ERM in

8 180 Index Duisenberg, Wilhelm continued Summer 1993, 57; in August 1993, as chairman of EU central bankers committee, expresses scepticism about whether European monetary union can occur on time, 125; turns down Tietmeyer s request in 1993 that he become president of European Monetary Institute, 125; canvassed by Tietmeyer as ECB president, 57; the 1996 coup at the European Monetary Institute, 57; Chirac tries to block his ascent to ECB presidency (March 1998), 135; imposes secrecy on ECB policy-meetings, 143; failings in communication skills during crisis of euro ( ), 145; anti-us and anti-semitic orientation of his wife becomes a problem, 57; did real power at ECB lie with Issing rather than with Duisenberg? 41, 151 his lectures as ECB president on irresponsible fiscal policies were ill-conceived, 151; his enthusiasm for Washington s attack at September 2003 G-7 meeting on Asian currency policies, 171 Dutch guilder, in possible union with Belgian and Luxembourg francs, 3; the implications of a hypothetical free float in 1980s and 90s, 11 12; its experience as a non-independent currency under various conditions compared with that of the freely floating British pound, 18; its too small devaluation in 1982, 19 20; hypothetical reincarnation as means of escaping deflation, 75 83; how an independent guilder might have been better than the euro for Dutch economy in the period , 147 East European currencies, how their inclusion in EMU might trigger a subsequent exit crisis, 93 4; arguments for and against early entry to EMU, 163 4; crucial issue of the entry rate, 164; potential inflation, 162 Ecu, how this basket currency would be recreated in a dissolution of European monetary union, 89 92; French bid to use as name for Europe s new currency rebuffed (December 1995), 129 Elf Acquitaine, its role in the funnelling of French state money into Kohl s slush fund, 32 Emminger, Otmar, would not have signed Delors report? 50 EMU separation agreements, illustrated for hypothetical case of Holland withdrawing from EMU, 80; see also disintegration of European monetary union and seigniorage agreements Erhardt, Ludwig, his opposition to European Monetary Union, 99 Euro, its potential international role, 6, 171; as possible counter to US dollar power, 6; how chosen for name of Europe s new currency (December 1995), 129; its plunge from and subsequent rebound, 142 6; comparison between euro s early plunge and the sharp fall of the DM at the start of the 1980s, 144; who likes a weak euro? 144; existential risk in, 142; framework and territorial risks in, 171; how should investors treat existential risk of? Euro nationalists, how they allied with US mercantilists at Dubai G-7 meeting (September 2003), 171 European Central Bank, why it should give more weight to Germany than arithmetic suggests, 17; why dominated by monetary nihilists, 25; Mitterrand s false portrayal of, 34; built as a federal institution, 97; what was agreed by the

9 Index 181 European Central Bank continued Delors Committee, 112; decision taken October 1993 to base in Frankfurt, 125; starts operations (1 July, 1998), 136; early mistakes in monetary policy, 143; failure to ease policy sufficiently in , 151; dangers of political alienation, , 167; ECB officials mount unconvincing defence of secrecy, 149; democratic standards should not be left to ECB to determine 149; excessive preoccupation with fiscal policy, 151; how powerful is its president? 152; how voting rights of national central bank presidents might change as EMU expands, 161; proposals for reform including issues of transparency, democracy, appointments, and rotating chairmanship for big country central bank presidents 167; how much influence can France have on, 34; see also deflation; reform proposals for European Monetary Union; Stability Council; lender of last resort function European Monetary Institute, as foreseen by the Delors Committee, 114; decision to base in Frankfurt, 125; Duisenberg refuses to become founding president, 1993, 125; 1996 coup in favour of Duisenberg as head, 57; Chirac decides not to challenge coup (1996) until Spring 1998, 130; see also Lamfalussy, Alexandre European monetary menu, the choices available, 2 3 European Monetary System, negotiations towards, 103; was its birth an obstacle on the way to monetary union? 105 6, 114; almost breaks apart, Summer 1993, 123 European Monetary Union, economic arguments for (as used by Brussels), 14; undermined by real estate cycles, 16; critical new steps towards in late 1987 and early 1988, ; blueprint for journey towards and final form agreed by Delors Committee, 113; failure to delay progress towards in wake of German reunification imposed high costs, 118; pressures grow to delay, , 130; in practice has not provided protection against US shocks, 146; disappointments of experience so far, 146 9; future expansion to the east and north, 162; see also accounting tricks; French aims in supporting; German support for; Hague summit (1969); Paris declaration (1972); reform proposals for European political union, how Delors committee bypassed the issue of, 112; before or after monetary union? 51; Mitterrand and Kohl propose an intergovernmental conference on April 1990, 116; absence of political union means increased risk of monetary union eventually falling apart or shrinking, 139; could political union coexist with several currencies in Europe? 141 Évian, Franco-German summit in, 1988, 37 Exchange restrictions, abolition of a pre-condition of progress towards EMU, 38, 109; Delors strives to promote legislation for unrestricted capital flows, 108 Fabius, Laurent, ultimately rejects idea of free float of franc in 1983, 12; his analysis of Mitterrand s popularity, 30 Feldstein, Martin, his opposition to European monetary union, 14

10 182 Index Fiscal policy limits in monetary union, what Delors Committee agreed, 112; see also Growth and Stability Pact Fontainebleau summit ( June 1984), 108 France Télécom, France uses its privatization in 1997 to reduce budget deficit artificially, 133 Freely floating exchange rate regime in Europe, why not considered, 3; how capital markets would develop under, 22; provides more scope than monetary union for portfolio diversification by investors, 22 French aims in supporting European monetary union, 4 French franc, 1968 crisis of, 4; fleeting proposal to make anchor currency in 1993, 3; why unsuitable as anchor currency, 3; lone advocates of greater international role, 8; periods of free floating in 1970s, 10, 102 3; its stunted international growth in 1980s, 11; assessment of proposals to float freely in 1983, 12; forced devaluation against the Deutschmark in early 1987 becomes springboard to restarting train towards European Monetary Union, 109; premature locking of the exchange rate between the franc and mark from 1987 onwards becomes a source of economic malaise in both France and Germany, 115; massive speculation against, , 122; how would the franc have behaved in mid-1990s if Balladur government had radically eased monetary policy in Summer 1993? 124; fall of the French franc in Autumn 1995 on uncertainty about whether Chirac Administration would tighten fiscal policy, 127; see also Naouri, Jean-Charles; Rubinowicz, Claude French-German Economic Council, established in January 1988, 110 French monetary inferiority complex, 4, 8 11; see also Pöhl, Karl Otto French policy-making elite, why in favour of EMU, 4 French referendum on Maastricht Treaty, 4 5, 34; fear of Germany a key element in, 64; why Mitterrand decides in favour of calling, 122; see also Delors, Jacques Genscher, Hans-Deitrich, as leading German advocate of European Monetary Union, 37; his election success, 1987, 37; launches new drive towards monetary union, 1987, 110; wanted Delors Committee to be made up of outside experts, 111 German Constitutional Court, October 1993 ruling in favour of Maastricht Treaty, 125; rules against last-ditch challenge (April 1998), 135 German monetary union, why Kohl forced the pace to, 34; the ruinous cost of, 51; key role played by Tietmeyer, 52; see also Pöhl, Karl Otto German reunification, as catalyst to European Monetary Union, ; why it should have led to a delay in timetable for monetary union, 118; but in practice it led to a speeding up, ; what its impact would have been on a floating francmark rate, 115, 119 German support for European Monetary Union, reasons for, 5, 7; role of industrial lobbies in, 9, 35; why did the banks support EMU? 35; opinion polls in 1996 show huge opposition, 130; see also Schmidt, Helmuti; Kohl, Helmut

11 Index 183 Germany, its potential to undermine European monetary union, 18, 172; the severity of its economic downturn, , 28; problems of experience so far with the euro, 28, 85 6, 148, 170; its unique power to demand reform of monetary union, 87 8, 170, 172; a possible list of reforms to be demanded by Germany, 86; why Germany should receive an especially high weight in euromonetary policy, 18, 80; see also Rhenish capitalism Glucksman, André, his analysis of French foreign policy, 48 Growth and Stability Pact, original pressure for from German Finance Minister Waigel, 127; Jospin s ineffective modifications of, 135; German insistence on increases in 1996 as likelihood of Italian entry grows, 130; almost all points agreed at Dublin Summit (December 1996), 130; ECB as selfappointed policeman of the pact, 151; is a pact really a necessary condition of a successful monetary union? 154 8; is the real purpose of the pact to exert discipline on Germany? 160; see also reform proposals for European Monetary Union Guigou, Elisabeth, 38 Hague Summit (1969), sets aim of European Monetary Union 99 Hannover Summit (1988), sets up Delors Committee, 38, 111 Hoffmeyer, Eric, 38 Issing, Otmar, a lone optimistic voice in September 1995 about EMU train reaching its destination, 127; German intent that he should dominate ECB board, with Duisenberg as the front-man or chairman figure, 151; as monetary nihilist, 23 Italian lira, 1995 crisis of, 127; reaction of French and German politicians to the cheap lira (1995), 127 8; a possible withdrawal from EMU, 92 Italy, a founder member of EMU? 127 8, 130, 131 3; economic problems experienced under EMU so far, Jospin, Lionel, becomes French PM (Spring 1997), 134; a socialist party aparatchik? 134; lays down four conditions for EMU to go ahead, 134 Juppé, Alain, rapid advances in political career under tutelage of Chirac, 47; joint role in corruption at Paris City Hall? 47; passionately in favour of constructing Europe, 47; anti- Anglo Saxon sentiments, 47; becomes Prime Minister, 1995, 47; as prime minister pushes through severe fiscal deflation in late 1995, 126 Kohl, Helmut, why in favour of European Monetary Union, 7; his desire for lasting peace in Europe, 28; Adenauer as his spiritual father, 36; first election victory as Chancellor, 106; his new government obliges Delors in March 1983 by setting stage for U-turn in economic policy, 106; his policy towards nuclear arms crisis, , 37; meeting with Mitterrand to commemorate Verdun, 28; closeness of his relationship to Mitterrand, 32; his favouring of Delors as EC Commission President, 31; enthusiasm for Single Market, 37; closeness of his relationship to Delors and the success of the latter in convincing him of the merits of European monetary union, 31, 37, 41 2, 110;

12 184 Index Kohl, Helmut continued his gradual conversion to the cause of European Monetary Union, 36 7; sees top argument for EMU its potential to guarantee peace in Europe, 63; his initial confrontation course over German unification, 36; how did he steer Germany into two flawed monetary unions? 34 8; did he sell the Bundesbank? 32; how his slush fund distorted democratic process as regards Maastricht, 35 6; controlled the CDU with an iron fist, 36; considers resignation in 1996 but decides to announce that he will fight 1998 Bundestag elections so as to safeguard EMU journey, 36, 130 Lamfalussy, Alexandre, as grandmaster of European financial diplomacy, 57; as member of Delors committee, 111; hosts regular meetings of the Delors Committee at the Bank for International Settlements, of which he is president, 112; nominated as first president of EMI, with 3-year term, after Duisenberg turns down the job, 125; his role in the EMI coup, 1996, 57 Lafontaine, Oskar, speculation that he would make EMU an issue in 1994 Bundestag elections, 125 Lender of last resort function, limits on this are inconsistent with irreversibility of monetary union, 157; limits on should be strengthened and possibility of exit from EMU given explicit legal recognition, 156 8; example for a Baltic country of how limits on might trigger exit from EMU, 93 Leuna affair, 32, 35, 126 Luxembourg, as illustration in optimum currency area theory, 19 Maastricht Treaty, no provision for withdrawal or dissolution, 63; suggested amendment to provide for dissolution and separation, 64; approved by German Constitutional Court, October 1993, 125; see also French referendum on Marjolin, Robert, his first mention of European Monetary Union, 9 Madrid summit ( June 1989), brings stalling of train towards monetary union, 115 Mercedes shock (1994), decision of German auto-maker to base new factory in France rather than Bavaria, 126 Metropolitan areas, could these be optimum currency areas? ; see also optimum currency area theory Milan summit ( June 1985), launches intergovernmental conference for Treaty on Single Market, 108 Mitterrand, François, his conversations with Wiesel, 27; analysis of his popularity by Fabius, 30; how sincere was his enthusiasm for monetary union? 28 34; as a Germanophile, 29; his early life, 30; his zig-zag career, 29; receives visitors in the night, 1983, 12; his U-turn towards Europe and away from Socialism, 13, 30, 106; meeting with Kohl at Verdun, 28; his crucial support for Kohl s policy on nuclear arms, 31; his special relationship to Kohl, 31 2; realpolitik approach to European monetary integration, 31; key role in setting deadlines for EMU at Maastricht conference, 31; his continentalism and coolness towards UK involvement, 32 3; why in favour of a European central bank, 33; his false claim about European central bank during the referendum campaign, 34; controversies

13 Index 185 Mitterrand, François continued about his actions following the fall of the Berlin Wall, 37; dismissive of economic arguments, 32 Monnet, Jean, his idea of building Europe through technical cooperation, 39 Monetary nihilism, defined, 13; at the ECB, 23 6; Chirac fails to see the danger of, 26; see also Trichet, Claude; Issing, Karl Otto; Tiemeyer, Hans; Duisenberg, Wilhelm; Alphandéry, Edmond; Pöhl, Karl Otto Mundell, Robert, his original presentation of optimum currency area theory, 14 Naouri, Jean-Charles, as advocate of greater international role for French franc, 8 Negative interest rates, how these could ease process of separation from/dissolution of monetary union, 73; their implementation during a deflation emergency, 166 Netherlands, an optimum currency area? 19; potential economic gains from currency sovereignty, 20 1; its key role if Germany were to pull out of EMU, 88 New York City, conceivable that an economic case could be made for an independent currency but politics totally against, North American Free Trade Act, comparison with Single Market Act, 14 Optimum currency area theory, misapplied as argument for monetary union, 13 16; criticisms especially in situation of large real estate cycles, 15 16; political union tends to reduce the number of currencies which would exist on the basis of purely economic optimization, 139; see also Mundell, Robert Paris declaration (October 1972); EC heads, including new members UK, Denmark, and Ireland, adopt monetary union as long-run aim, 101 Pöhl, Karl Otto, his advocacy of greater international role for French franc, 8; insistence on abolition of exchange restrictions as precondition of progress towards monetary union, 38; softer approach to European Monetary Union than previous Bundesbank presidents, 50; satisfied with having turned the original grand scheme for European Monetary System on its head (and reasserting Bundesbank s independence), 50, 104; owed his career advances to Helmut Schmidt, 50; ambiguities in attitude to European Monetary Union, 50 1; cool relationship to Delors, 51; insists on UK membership of EMS as precondition of progress towards EMU, 51; Margaret Thatcher in error viewed him as staunch opponent of EMU, 52; his failure to influence the process of German Monetary Union, 51 2; failure to see the costs which European monetary union could impose on German economy, 52 3; what if he had refused to sign the Delors report? 51; his slogan that the new European money should be as stable as the Deutschmark, 52; a monetary nihilist, 53; his phoney comparison between the potential disaster of European monetary union and German monetary union, 53; key role as member of Delors Committee in writing blueprint for monetary union, 111

14 186 Index Pompidou, Georges, his bid for the pro-europe centre ground of French politics, 98; Delors joins first government of, 40 Prodi, Romana, his role as new Italian PM (Spring 1996) in making Italy a founder member of EMU, 131 Quebec separation from Canada, the hypothetical monetary consequences, 67 8 Real estate market bubbles, as a problem for monetary union, 16 19; examples of in Germany, Spain, Netherlands, 17; potential bubbles in East European countries a possible problem for monetary union, Reform proposals for European Monetary Union, how national central bank presidents could play a key role in democratization process, 151; how to make the European Central Bank transparent, 151; what to do about the Growth and Stability Pact, ? an agenda for reform, 166 8; which government would lead the drive for reform? ; see also lender of last resort function Rhenish capitalism, could be salvaged outside monetary union, 23 Rome summit (October 1990), a crucial milestone on the way to Maastricht Treaty, 116 Rubinowicz, Claude, as advocate of greater international role of French franc, 8 Rueff, Jacques, his ambitions for French financial power, 8 Schlesinger, Helmut, his opposition to monetary nihilism, 25; view that monetary union could follow political union in Europe, 51; support for monetary activism, 53; unable to halt EMU train during his brief presidency of the Bundesbank, 53; would have eased policy aggressively in late 1993, 123 Schmidt, Helmut, dislike of Deutschmark nationalism, 5, 103; his relationships to Giscard d Estaing and François Mitterrand, 31, 107; respect for Barre, 102; his role in founding European Monetary System, 103; his attack on Tietmeyer, 55 Schroeder, Gerhard, his failure to appoint a talented activist to head of Bundesbank, 26; in 1996 favors delay in EMU timetable, 131; rumours in early 1997 of a Grand Coalition led by Schroeder and Biedenkopf with aim of delaying EMU, 134 Seigniorage agreements, their use in various proceedings associated with disintegration of monetary union, 70 Shocks, asymmetric and symmetric as determinants of optimum currency areas, 15 Single Europe Act, 37, 109; see also Milan summit Single Market, its launch, 1985, 13, 108; the role of Lord Cockfield, 108 Small currencies, can be beautiful, 17, 19 22; will a small country be the first to leave EMU? 160 1; small countries give up a powerful monetary weapon in joining EMU, 161; see also disintegration of European Monetary Union Snake, as predecessor of European Monetary System, 10, 101, 103; France s exit from in 1974 and 1976, Socialism, can be salvaged by nation state with sovereign money, Spain, bids to become founder member of EMU (1996), 131 3; potential problems from EMU membership to date, 147

15 Index 187 Stability Council, a proposal for this to be set up to deal with deflation danger, 166 Strasbourg summit, December 1989, 116 Structural economic change, monetary nihilists as advocates of, 23 Swiss franc, why best as an independent, 19 Swiss National Bank, its problems in finding a domestic anchor for policy, 20 Switzerland, which sectors would gain and lose from end of freely floating currency, 20; capital flight into during 1995 on growing German investor unease about monetary union, 127 Thatcher, Margeret, at Fontainebleau summit accepts deal on budget refunds to UK, 108; impressed by Delors choice of Lord Cockfield as Commissioner and initial emphasis on Single Market, 108; makes wrong assessment of Pöhl s attitude to European Monetary Union, 52; reasons for her failure to hold back tide of monetary union at the Rome Summit, October 1990, 117 Tietmeyer, Hans, German delegate to Werner Committee, 1970, 54; career take-off starts with his writing of the Lambsdorff paper, 54; francophile Kohl loyalist, diplomat and executioner, 53 7; as Kohl s top economic diplomat, 37; his role in drafting clause on European monetary integration in the Single Market Treaty, 109; failed assassination attempt against, 53; key role in design of German monetary union, 52; international face of the Bundesbank as vice-president under Schlesinger, 54; special relationship with Claude Trichet exaggerated? 54; oversees damage repair after EMS storm, , 123 6; warns that an appreciation of the DM is unacceptable in summer 1993, 125; his grounds for supporting European Monetary Union, 56; unsuccessful in persuading Duisenberg in 1993 to become first president of European Monetary Institute, 125; in summer 1995 declares that EMU timetable should take second place to proper foundations, 127; role in organizing 1996 coup at European Monetary Institute in favour of Duisenberg, 57; rumours that he tried to arrange a Dutch request for EMU delay in early 1997, 58; attack against by Helmut Schmidt, 55; favours exchange rate stability in Europe, 56; in favour of narrow monetary union, excluding Italy, 131; concern that Deutschmark should not be overvalued on its entry into EMU, 132; produces a favourable report on EMU going ahead in March 1998, 135; a grandmaster of European financial diplomacy, 57; failed to press for necessary safeguards for Germany in European monetary union, 61 Tietmeyer Trichet axis (1993 5), how solid, and was Trichet in fact Tietmeyer s satellite? 123 5; role in forestalling a radical easing of French monetary policy in Summer 1993, 124 Treaty of Nice, its provisions for rotation of national central bank president voting rights at ECB, 161 Trichet, Claude, false assessment of euro s power to make European economy independent of US, 6; a monetary nihilist, 24; his mistaken emphasis on

16 188 Index Trichet, Claude continued low long-term interest rates and strong currencies, 24 5; monetary courtesan, ayatollah or dupe? 58 60; devalues the franc twice under Balladur and then becomes monetary ayatollah under Bérégovoy, 60; as author of 3% of GDP limit on fiscal deficits in Maastricht Treaty, 58; argues for a temporary DM exit from ERM in July 1993, but rebuffed by Tietmeyer, 59; behaves as satellite to Tietmeyer after July 1993 ERM crisis by blocking a radical easing of monetary policy, 124 5; overestimates his special relationship with Tietmeyer? 59; his betrayal of Balladur, to whom he owed his major career advances, in favour of Chirac, during 1995 presidential election campaign, 58; his pressure on Chirac to cut budget deficit, 1995, 58, 129; criticized by Chirac for role in Credit Lyonnais scandal, 58; does not yield to pressure from Chirac to ease policy in Summer 1995, 129; an enthusiast of European integration, 59 60; reads poetry on TV, 60; sees Europe as menaced by Americanization, 59; why did he acquiesce in 1996 Duisenberg coup at EMI? 58; put forward by Chirac as candidate for ECB presidency (April 1998), 135; could endanger EMU if he does not back down from interfering in fiscal policy issues, 153; see also Tietmeyer Trichet axis (1993 5) UK entry into EMU, how could this be sold to voters? 165; how could an entry bid be linked to a reform bid? 165, 168 9; key issue of entry rate for pound, 165 Verdun, commemoration of the battle by Mitterrand and Kohl, 1984, 28 Villepin, Dominique de, in iron trio of Chirac s 1st administration as chief of staff, 47; aim of repelling Anglo-Saxon liberalism, 47; vision of combative Catholicism, 47 Volcker squeeze, compared with Barre s exchange rate fix as a means of bringing an end to high inflation, Waigel, Theo, as German finance minister declares in Summer 1993 that unimportant whether EMU is delayed, 125; in Summer 1995 launches drive for a Stability Pact, 127; attempts unsuccessfully to use revaulation of Bundesbank gold reserves to fudge budget deficit figures in 1997, 134 Welteke, Ernst, assures German public that Italy to be excluded from EMU, 131; how he became president of the Bundesbank, 62; an unfortunate choice as Bundesbank head? 26, 62 Werner Report (1970), , dusted down by Delors Committee, 99 Wiesel, Elie, his conversations with President Mitterrand, 27