Realigning Interests

Transcription

1 Realigning Interests

2 EUROPE IN TRANSITION: THE NYU EUROPEAN STUDIES SERIES The Marshall Plan: Fifty Years After Edited by Martin Schain Europe at the Polls: The European Elections of 1999 Edited by Pascal Perrineau, Gérard Grunberg, and Colette Ysmal Unions, Immigration, and Internationalization: New Challenges and Changing Coalitions in the United States and France By Leah Haus Shadows Over Europe: The Development and Impact of the Extreme Right in Western Europe Edited by Martin Schain, Aristide Zolberg, and Patrick Hossay Defending Europe: The EU, NATO and the Quest for European Autonomy Edited by Joylon Howorth and John T.S. Keeler The Lega Nord and Contemporary Politics in Italy By Thomas W. Gold Germans or Foreigners? Attitudes Toward Ethnic Minorities in Post-Reunification Germany Edited by Richard Alba and Peter Schmidt Germany on the Road to Normalcy? Politics and Policies of the First Red-Green Federal Government Edited by Werner Reutter The Politics of Language: Essays on Languages, State and Society Edited by Tony Judt and Denis Lacorne Realigning Interests: Crisis and Credibility in European Monetary Integration By Michele Chang

3 Realigning Interests Crisis and Credibility in European Monetary Integration Michele Chang

4 REALIGNING INTERESTS Michele Chang, 2004 Softcover reprint of the hardcover 1st edition All rights reserved. No part of this book may be used or reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles or reviews. First published 2004 by PALGRAVE MACMILLAN TM 175 Fifth Avenue, New York, N.Y and Houndmills, Basingstoke, Hampshire, England RG21 6XS Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin s Press, LLC and of Palgrave Macmillan Ltd. Macmillan is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN ISBN (eBook) DOI / Library of Congress Cataloging-in-Publication Data Chang, Michele. Realigning interests : crisis and credibility in European monetary integration / by Michele Chang. p. cm. (Europe in transition) Includes bibliographical references and index. 1. Currency crises European Union countries. 2. Monetary policy European Union countries. 3. European Union countries Economic integration. I. Title. II. Europe in transition (New York, N.Y.) HG3942.C dc A catalogue record for this book is available from the British Library. Design by Newgen Imaging Systems (P) Ltd., Chennai, India. First edition: June,

5 To my family: Wayne, Adoracion, William, and Robert

6 This page intentionally left blank

7 Contents List of Tables List of Figures Abbreviations Acknowledgments ix xi xiii xv Chapter 1 Introduction 1 Chapter 2 Chapter 3 Rules and Norms of European Monetary Cooperation 17 Political Economy of Currency Crises and Devaluation 41 Chapter 4 France, Chapter 5 France, Chapter 6 Italy: Domestic versus International Origins of Currency Crises 125 Chapter 7 Ireland 141 Chapter 8 Conclusion 159 Notes 175 Sources 181 Index 195

8 This page intentionally left blank

9 List of Tables 1.1 Summary of arguments to be tested: theories of currency crises Summary of arguments to be tested: theories of devaluation EMS realignments against central rates Expectation of exchange rate realignment, Expectation of devaluation by country, Devaluation Ifop-RTL-Le Point poll on intentions to vote for the PS Summary table of arguments on emergence of currency crises and devaluation, Summary table of arguments on devaluation in France, Sofres poll on voters expectations of France s seven-year outlook Intention to vote in the 1988 legislative elections (%) Poll: If the franc had been devalued against the mark, do you think this would contribute to the Predicted future distribution of seats in new national assembly Poll: Do you hope that in the next legislative elections voters will manifest their support for Mitterrand and the current government or that the voters will use this occasion to manifest their discontent? Summary table of French economic indicators, Progress toward fulfilling Maastricht criteria: deficits and debt as percentage of GDP Poll: Do you think the following personalities would make a good president of the Republic? Intentions to vote in second round: Le Nouvel Observateur polls 116

10 x List of Tables 5.10 Intentions to vote in the second round: IFOP- L Express polls First-round results of the presidential election Second-round results of the presidential election Summary table of arguments on the emergence of currency crises in France, Summary table of arguments on devaluation in France, Accession countries EMU convergence, Economic indicators and the Maastricht Treaty convergence criteria Population, GDP, and growth rates of EU versus accession countries 171

11 List of Figures 4.1 Monthly inflation, 1981 electoral period Quarterly current account balance, 1981 electoral period Monthly reserves, 1981 electoral period One-month Eurofranc interest rates, 1981 electoral period Monthly inflation, 1983 electoral period Quarterly current account balance, 1983 electoral period Monthly reserves, 1983 electoral period One-month Eurofranc interest rates, 1983 electoral period Monthly inflation, 1986 electoral period Quarterly current account balance, 1986 electoral period Monthly reserves, 1986 electoral period One-month Eurofranc interest rates, 1986 electoral period Ifop-RTL-Le Point poll: Do you have a good opinion or bad opinion of Mitterrand as president? Poll: Do you have a good opinion or bad opinion of Fabius as prime minister? Monthly inflation, 1988 electoral period Quarterly current account balance, 1988 electoral period Monthly reserves, 1988 electoral period One-month Eurofranc interest rates, 1988 electoral period Le Nouvel Observateur polls: intentions to vote in the first round, January April Intention to vote in the second round, Mitterrand versus Barre Intention to vote in the second round, Mitterand versus Chirac Poll: Which of the following would make a good president of the republic in the next seven years? Monthly inflation rates, 1993 electoral period Quarterly current account balance, 1993 electoral period Monthly reserves during 1993 electoral period Eurofranc interest rates, 1993 electoral period 105

12 xii List of Figures 5.13 Summary of polls on intentions to vote (%) in 1993 election Gallup-L Express poll on approval of the prime minister First-round intentions to vote First-round intentions to vote Monthly inflation, 1995 electoral period Quarterly current account balance, 1995 electoral period France monthly reserves, 1995 electoral period One-month Eurofranc interest rates, 1995 electoral period Italian elections and devaluations, French elections and devaluations, Current account balance and elections, Inflation rate and elections, Interest rates and elections, Real exchange rates and elections, Irish elections and devaluations, Annual current account balance as percentage of GDP, Exchange rates and elections in Ireland, Quarterly current account balance, 1987 electoral period Quarterly current account balance, 1989 electoral period 152

13 Abbreviations AN CERES DC DM EC EMS EMU ERM EU GDP MSI OECD PCI PD PDS PRI PPI PS PSI PSDI RPR STF TD UDF National Alliance (Italy) Centre d études de recherches et d éducation socialistes (France) Christian Democratic Party (Italy) Deutsche mark European Community European Monetary System European Monetary Union Exchange Rate Mechanism European Union Gross Domestic Product Italian Social Movement Organization of Economic Cooperation and Development Italian Communist Party Progressive Democrat (Ireland) Democratic Party of the Left (Italy) Italian Republican Party Italian People s Party Socialist Party (France) Italian Socialist Party Italian Social Democratic Party Rassemblement pour la Republique (France) Short-Term Facility Member of Parliament (Ireland) Union pour la Démocratie Française (France)

14 This page intentionally left blank

15 Acknowledgments My greatest debt is to my adviser, Stephan Haggard. His guidance, criticism, and encouragement made possible both my dissertation and the successful completion of this book. I also offer my thanks and gratitude to the other members of my dissertation committee: Neal Beck, Graham Elliott, Miles Kahler, Ross Starr, and Kaare Strom. Others who have assisted me in various ways by reading drafts, helping me in the research process, or talking through some of the ideas with me include: David Andrews, Bill Bernhard, the Bundesbank Press Office, Benjamin Cohen, Harold Colson, Russell Dalton, Paul DeGrauwe, Jeff Frieden, John Freeman, Peter Gourevitch, Daniel Gros, Peter Hall, Mark Harmon, Erik Jones, Peter Katzenstein, Peter Kenen, David Lake, David Leblang, Arendt Lijphart, Ivo Maes, Mat McCubbins, Kate McNamara, Jacques Mélitz, Michael Moran, Andrew Moravscik, Thomas Oatley, Paul Papayoanou, Dennis Quinn, Kevin Rask, Larry Ryan, Jerry Sheridan, Pierre Siklos, Chris Way, and participants of the 1995 Harvard Graduate Student Workshop, the 1995 APSA meeting, the 1996 Conference of Europeanists, and the 1996 Institute on Western Europe Graduate Student Conference. I also thank all those who graciously allowed themselves to be interviewed for this book. I would like to thank the following organizations for providing me with funding: the Ford Foundation, the Institute on Global Conflict and Cooperation, the Deutscher Akademischer Austausch Dienst, and Colgate University s Faculty Development Council. The University of California, San Diego and Colgate University provided the institutional support necessary to complete this book. I also thank my editors at Palgrave, Anthony Wahl and Heather Van Dusen, for their role in bringing this book to completion. Venn Saltirov and Maura McClelland provided excellent research assistance. The following individuals offered much needed and much appreciated support during the writing of this book: Stephen Applebaum, Alex Bergmann, Bob Bowman, Marci Bowman, Maureen Feeley, Bill

16 xvi Acknowledgments Griswold, Kathleen Hancock, Lisa Hilbink, Jamie Gerber, Chris Harrison, Carolyn Hsu, Karen Leahy, Jennifer Smith, Cami Townsend, and Ali Yegulalp. I would also like to thank the friends I made in Europe, especially the Rothenburg Posse and my Dresden buddies, for renewing my interest in Europe and giving me reasons to keep going back. Finally, I dedicate this book to my family: Wayne and Adoracion Chang, my parents, and my brothers William and Robert. Through the years, your belief in the importance of my education and your unwavering support allowed me to pursue my interests, and I thank you for all that you have done.