Euro and European Monetary Union between Ideal and Crises
| Author | Merita Shabani |
| Position | University AAB, Republic of Kosovo |
| Pages | 59-76 |
Vo
l. 4 N
o
. 2
Jul
y
, 201
8
ISS
N 2410-391
8
A
cces online at www.ii
p
ccl.or
g
59
A
cademic Journal o
f
Business,
A
dministration, Law and Social Sciences
II
PCCL Publishin
g
, Graz-
A
ustria
Euro and European Monetar
y
Union between Ideal and Crises
PhD (C.) Merita Shaban
i
U
niversity
AA
B, Republic o
f
Kosov
o
Abs
tr
ac
t
T
he idea of single currency applicable to Member States of
E
uropean
U
nion (
EU
) ought to be
one of the most signifi cant
EU
projects. However, the occurrence of
E
uro crisis in recent years
h
as to great extend shaken the sustainability of euro currency. Thus, this article scrutinize the
r
ole that the euro plays as an ideal project to facilitate the development of
E
uropean
U
nion
on one side, and the challenges posed by euro crisis for a successful functioning of the euro
o
n th
e
o
th
e
r
.
Ke
y
words:
EU
, Monetary
U
nion, Financial Crises,
E
uro Zone and
E
uro Crisis
.
I
ntr
oduc
t
ion
W
hat is the signi
fi
cance o
f
a currenc
y
to a countr
y
or a nation?
A
t least since the late
19-th centur
y
, the currenc
y
o
f
a countr
y
is closel
y
associated with sovereignt
y
o
f
the
n
ation and state
p
ower.
I
n short, a (well known blue
p
rint in relation with this is that
c
urrenc
y
s
y
m
b
o
l
izes a nation.
A
not
h
er as
p
ect t
h
at a currenc
y
associates to a countr
y
i
s the de
fi
ning nature o
f
p
olitical entit
y
, as o
en currenc
y
is used b
y
Government to
s
h
a
p
e
p
o
l
itica
l
i
d
entities an
d
socia
l
l
imits (Ma
h
ias, 2004).
P
u ing the signi
fi
cance o
f
the euro currenc
y
in
E
uro
p
ean context, it serves several
p
ur
p
oses.
E
uro has economic
f
unctions and this is not contestable. Moreover, ver
y
i
m
p
ortant role o
f
the euro is the denotation as a s
y
mbol o
f
E
uro
p
ean integration
t
h
at goes we
ll
b
e
y
on
d
in
d
ivi
d
ua
l
EU
mem
b
er nations. Nevert
h
e
l
ess,
l
ast euro crises
have raised man
y
doubts b
y
triggering
q
uestions o
f
whether introduction o
f
a single
c
urrenc
y
in several
EU
member states has achieved its
p
ur
p
ose o
f
economic bene
fi
ts.
W
hether the euro as a s
y
mbol o
f
EU
integration has indeed assisted
f
or
f
urther
i
ntegration or
d
isintegration? T
h
us, t
h
is artic
l
e a
dd
resses two main issues su
b
ject to
d
iscussion in this article.
I
t scrutinizes the role o
f
the euro as
p
art o
f
an une
q
uivocal
p
roject to
f
acilitate the develo
p
ment o
f
a
E
uro
p
ean integration and identit
y
, and it
e
xamines whether there is a su
cient su
pp
ort
f
rom
EU
member states to
f
acilitate an
i
deal success
f
ul
f
unctioning o
f
the euro.
The foundations of monetar
y
unio
n
T
he idea o
f
common currenc
y
started to develo
p
with Maastricht Treat
y
coming
i
nto existence in t
h
e
y
ear 1992. T
h
e treat
y
ex
p
ress
ly
recognize
d
t
h
e sing
l
e currenc
y
as one o
f
the ke
y
objectives o
f
the Monetar
y
U
nion’s Polic
y
. Having
p
aved the wa
y
f
or the establishment o
f
a single currenc
y
, the euro commenced its journe
y
in 1999
as a landmark in
E
uro
p
ean market integration and be
y
ond. The launching o
f
the
e
uro currenc
y
is considered to be an
E
conomic and Monetar
y
U
nion re
fl
ection on
two sides, the economic as
p
ect and the
p
olitical as
p
irations o
f
the
E
uro
p
ean
U
nion.
Vo
l. 4 N
o
. 2
J
u
ly
, 2018
A
cademic Journal o
f
Business,
A
dministration, Law and Social Science
s
II
PCCL Publishin
g
, Graz-
A
ustri
a
I
SSN 2410-391
8
A
cces online at www.ii
p
ccl.or
g
60
T
he key idea behind the lunching of the euro currency ought to be the assurance of
s
ustainable growth by which would
f
acilitate and
f
oster
f
urther political integration
o
f
the
E
uropean
U
nion (
I
vo & Moss, 2014).
T
he integration of Single currenc
y
under the framework of the single market idea
i
s onl
y
one side o
f
E
uro
p
ean economic and
p
olitical integration. Following the
s
uccess
f
ul
p
ursuit o
f
economic integration with the
f
ounding o
f
E
uro
p
ean Coal
and Steel Communit
y
in 1952 and the establishment o
f
the
E
uro
p
ean
E
conomic
C
ommunit
y
with the Treat
y
o
f
Rome in 1957, it became evident that new
p
hase o
f
e
conomic integration becomes imminent.
I
n
f
act, nobod
y
could have guessed this
r
a
p
i
d
economic integration w
h
ere t
h
e sing
l
e mar
k
et
b
ecomes rea
l
it
y
wit
h
t
h
e Sing
l
e
E
uro
p
ean
A
ct in 1986 an
d
t
h
e Sing
l
e Mar
k
et Programme in 1992. Since t
h
en,
d
eca
d
es
h
ave
p
asse
d
an
d
t
h
e nee
d
to remove t
h
e remaining o
b
stac
l
es
l
e
d
to new i
d
eas an
d
n
ew
d
eve
l
o
p
ments in or
d
er to
k
ee
p
moving
E
uro
p
ean
I
ntegration. Here it a
pp
ears
the introduction o
f
a single currenc
y
named
E
uro. Sim
p
l
y
because it was
f
elt that
wit
h
out
h
aving in
pl
ace common sing
l
e currenc
y
,
d
ee
p
er sing
l
e mar
k
et integration
c
ou
ld
b
e en
d
angere
d
.
T
he ex
p
erience o
f
the
E
uro is a uni
q
ue histor
y
o
f
currencies.
A
ke
y
characteristic o
f
this uni
q
ue histor
y
carries in itsel
f
two elements.
O
n the one hand, the
E
uro
p
ean
C
entral Bank serves as a su
p
ranational regulator, b
y
having
f
ull inde
p
endence in
c
onducting a single monetar
y
p
olic
y
f
or the euro area.
O
n the other hand, in terms
o
f
p
olitical will,
E
uro
p
ean Central Bank has rather limited sovereignt
y
as it remains
p
redominantl
y
national in man
y
p
olic
y
areas. The com
p
arison o
f
these two arguments
has raised
q
uestions about the sustainabilit
y
and e
ectiveness o
f
such an institutional
arrangement in re
l
ation wit
h
euro currenc
y
(
O
tmar, 2008).
I
n t
h
is context,
O
tmar
I
ssing in his s
p
eech argues that
E
conomic and Monetar
y
U
nion can well
f
unction
with current structure organizations based on his arguments as
f
ollows
:
“First, Monetar
y
U
nion in itsel
f
has a clear
p
olitical dimension.
I
t entails the trans
f
er
o
f
national monetar
y
p
olic
y
decision-making
p
owers to a su
p
ranational entit
y
, the
E
uro
p
ean Centra
l
Ban
k
. Re
l
in
q
uis
h
ing nationa
l
sovereignt
y
in suc
h
an im
p
ortant
fi
eld is a substantive contribution to
p
olitical integration.
A
central bank is, a
er all,
an element o
f
statehood. The Maastricht Treat
y
has made the
E
CB inde
p
endent o
f
an
y
p
olitical in
fl
uence so that it is able to
f
ul
fi
ll its clear mandate o
f
p
reserving
p
rice
s
tabilit
y
. Monetar
y
p
olic
y
-making is hence not onl
y
centralized but also de
p
oliticized.
T
his ste
p
was onl
y
p
ossible because euro area members had achieved a high degree o
f
c
onvergence in monetar
y
p
olic
y
a itudes and
p
re
f
erences in the run-u
p
to Monetar
y
U
n
io
n.
M
oreover, the wa
y
in which
p
artici
p
ating countries see themselves and their role as
n
ation states has changed
p
ro
f
oundl
y
.
I
n this res
p
ect, the launch o
f
the euro marks the
m
ost recent and
f
ar-reaching ste
p
. National sovereignt
y
has not onl
y
been trans
f
erred
i
n the area o
f
monetar
y
and exchange rate
p
olicies but also in other ke
y
p
olic
y
areas,
s
uc
h
as com
p
etition an
d
tra
d
e. Fina
lly
, a sing
l
e mar
k
et
h
as
b
een esta
bl
is
h
e
d
.
A
s a
r
esult, the euro area countries alread
y
share im
p
ortant elements o
f
state
f
ormation
which are also ke
y
to the
f
unctioning o
f
Monetar
y
U
nion” (
O
tmar, 2008)
.
U
ndoubtedl
y
, the
f
oundations o
f
monetar
y
union, res
p
ectable the establishment
o
f
E
urozone has been un
p
recedented success
f
ul stor
y
as it have been noted in the
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