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It is easy with the benefit of hindsight to treat the path to the present euro area as if it was an inevitable and carefully planned process. In practice it has been a series of decisions taken in the light of the broad goal of closer integration on the one hand and the more immediate needs and concerns on the other. If this had not been the case then it is unlikely that the EU would have reached the difficulties at the time of writing (2011), where Greece, Ireland and Portugal have been forced into an emergency support programme from the EU and the IMF because markets regard their debt financing programmes as unsustainable within the euro area. Monetary union is not a topic which can somehow be treated separately from the rest of economic integration. Indeed, it is important to recall in the EU context that EMU stands for Economic and Monetary Union and not European Monetary Union. All the work on optimum currency areas makes it very clear that integration in product and labour markets as well as the existence of complementary structures and policy frameworks are essential if a monetary union is to work well. The process is clearly incomplete in the European environment. In many respects the process of closer integration in Europe has been opportunistic in the sense that integration has progressed in those dimensions that appeared tractable at the time.

In this article, therefore, I map the progress towards monetary union in Europe since the Second World War against the criteria which are required for a successful monetary union, so that the balance between the political decision-making and the economic requirements can be clear. The article is in four parts: monetary integration in the immediate post war period; the Werner Plan and the creation of the EMS (European Monetary System); the road to the euro area; and the development of monetary union. In that final section I relate the structure of the existing system to the problems encountered in 2010 and the real threats to the continuation of European monetary union in the form currently envisaged. These four phases cover the periods: 1944–1970; 1971–1992; 1992–2001; and 2002 onwards.

Monetary Integration in the Immediate Post-war Period

The European input to the design of the post-war international monetary system was largely undertaken by the UK, but the final form of the system agreed at Bretton Woods in 1944 was mainly US inspired and was centred on the USA. The monetary system in Eastern Europe was imposed by the Soviet Union. The Bretton Woods system itself was a reaction to the interwar experience and the problems of adjustment after the First World War. The immediate post-war experience had not been a happy one. Germany had dissolved into hyperinflation and for most other countries the intention had been to return to the stability of the gold standard. But the attempts to return at parities that were too high had imposed strains and a decade later the system in the largest economy, the USA, itself collapsed, resulting in the Great Depression. Countries looked to protect themselves on the one hand and tried to obtain competitive exchange rates on the other.

The Bretton Woods system offered stability by comparison. Exchange rates were to be fixed but adjustable should parities become unsustainable. Fixity was not total, but a fluctuation of ±1% was permitted. While fluctuations of that size offer arbitrage opportunities, they are small enough to be neglected by commercial businesses in setting prices. Although there were some initial realignments, by and large the system worked rather well for 20 years and was the basis of the post-war recovery. The Bretton Woods agreement also led to the setting up of the International Monetary Fund (IMF) which could use deposits from all of the member countries to provide temporary assistance to a country that was having balance of payments difficulties. This reflected the inherent asymmetry of the system. A country that is running surpluses has little problem maintaining its exchange rate at fixed parity. One which is running a deficit, on the other hand, will eventually run out of reserves. While other routes to restoring surpluses may be possible, the obvious route is to devalue. However, devaluations do not produce immediate surpluses; in fact they do the opposite in the short run as existing contracts are honoured before expenditure is switched towards domestic goods and exports in response to the change in relative prices – hence the need for temporary assistance by the IMF conditional on moving towards a new and sustainable long-term position at the new parity.

Thus by the mid-1960s, when strains began to emerge, the system of fixed but adjustable exchange rates was the peacetime system that European countries were accustomed to. The strains in the main came not from European countries but from the USA itself, which was the anchor of the system. All parities were expressed with respect to the US dollar, which was itself convertible into gold at $35/ounce giving a basis reminiscent of the gold standard. The US problems, to quite some extent, stemmed from the costs of financing the Vietnam war, and, once inflation began to take hold, a different anchor was needed.

No other country was in a position to take on the anchor role and hence the result was a drift into floating exchange rates, something only the Canadians had had any substantial experience of in the post-war period. What the countries of the European Community sought (as this was the Community of the Six up until 1971) was a route back to stability at least with respect to each other. The route chosen by the time of the Hague summit in December 1969 was to try to create a form of economic and monetary union in which exchange rates among the members would be fixed. The process was to be progressive, and a committee was set up under Pierre Werner, then Prime Minister of Luxembourg, to map out a plausible way forward. The Commission document on which the Hague resolution was largely based already incorporated the main ideas of the Werner Committee’s ultimate proposals for an economic and monetary union by stages. It also drew on the Barre Report, issued in February 1969, which called for coordination to achieve medium term economic objectives.

The Werner Plan and the Creation of the EMS

The Werner Committee worked quickly, producing an interim report in May 1970 and a final report in October the same year. The proposals were adopted by the European Council in February 1971. The plan envisaged economic and monetary union being achieved in three phases over the course of the ensuing decade, so it would be completed in 1980. Such an economic and monetary union would include the four freedoms of movement of goods, services, labour and capital laid down in the Treaty of Rome as well as having ‘a single monetary entity… characterized by the total and irreversible convertibility of currencies; the elimination of fluctuation margins of exchange rates… [and] the irrevocable fixing of parities’ (Commission of the European Communities 1970, p. 10). While a single currency was not viewed as essential to this scheme, it was thought the best option. While it recognized the need for a single monetary policy at the Community level and agreement on medium-term economic objectives and coordination of shorter run economic policy, it expected the union to be relatively decentralized and for there to be no large Community budget or fiscal resources.

It was quite explicit about the form of the institutions for monetary policy ‘The constitution of the Community system for the central banks could be based on organisms of the type of the Federal Reserve System’ in the USA (Commission of the European Communities 1970, p. 13). The Community institution would take the interest rate and other monetary decisions and manage the Community’s foreign exchange reserves. It is also clear that an organ of ‘economic government’ was envisaged: ‘While safeguarding the responsibilities proper to each it will be necessary to guarantee that the Community organ competent for economic policy and that dealing with monetary problems are aiming at the same objectives’. This approach to increasing coordination of economic and monetary policies had been signalled by the Commission as early as 1962 and the Committee of central bank governors had been set up in 1964 to assist the process.

The bold characteristics of the plan are summarized as (Commission of the European Communities 1970, p. 26):

‘Economic and monetary union is an objective realizable in the course of the present decade provided only that the political will of the Member States to realize this objective… is present’

‘Economic and monetary union means that the principal decisions of economic policy will be taken at Community level and therefore that the necessary powers will be transferred from the national plane to the Community plane…. The economic and monetary union thus appears as a leaven for the development of political union which in the long run it will be unable to do without.’ (p. 26).

The requirements of the first stage were sweeping, going beyond what has been achieved in economic policy cooperation in the ensuing forty years, with a three-stage coordination of fiscal policy each year and a harmonization of tax instruments, organized in the first instance through the Council of economic and finance ministers. For monetary policy, ‘From the start of the first stage, by way of experiment, the central banks acting in concert will limit de facto the fluctuations in the rates of exchange between their currencies to narrower margins than those resulting from the application of the margins in force for the dollar at the time of the adoption of the system. This objective will be achieved by concerted action in relation to the dollar’. The Committee of central bank governors would be required to make twice yearly reports on progress in developing the joint tools.

The progression would involve complete liberalization of capital movements and integration of financial markets. The final stage would however require a treaty revision in order to create the new institutions to replace coordinated national ‘instruments’ with ‘community instruments’ (Commission of the European Communities 1970, p. 24). These new institutions would include a European Fund for Monetary Cooperation under the control of the Governors of the central banks (Commission of the European Communities 1970, p. 25). Only the first stage had a timetable, three years.

The proposals did not really get off the ground as the dollar was effectively floated during 1971 and the best the countries could attempt was a joint float against the US dollar with limited fluctuation of each EC currency with respect to the others, as agreed by the central bank governors in April 1972. This mechanism was known as ‘the snake’ as illustrated in Fig. 1, where the shape of the joint movement over time might look somewhat like a snake. Under the snake the member states were required to keep their currencies within 2.25% of each other. In August 1971 the USA ended convertibility with gold and in December the Group of 10 largest countries made the Smithsonian Agreement, whereby the other countries appreciated with respect to the dollar and tried to keep their exchange rates within 62% of the new parity.

European Monetary Integration, Fig. 1
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The snake

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This proved difficult for many countries and the arrangements were abandoned in March 1973, when the system moved to floating exchange rates. By that time also the Community had been enlarged by the addition of Denmark, Ireland and the UK, the latter two having already started floating against the US dollar. This early period is known as the ‘snake in the tunnel’ as the Smithsonian Agreement permitted fluctuation of ±4.5%, the edges of that band constituting the ‘tunnel’. France, Ireland, Italy and the UK found remaining in the snake difficult and exited quite early with the impact of the first oil crisis. The system continued with Belgium, Luxembourg, Denmark, West Germany and the Netherlands until 1979 (the first two countries already having a common currency with parities fixed in 1944).

By 1978 the pressure to achieve more comprehensive exchange rate stability in the Community had risen to the point that the French President Valéry Giscard d’Estaing and the German Chancellor Helmut Schmidt proposed the creation of a European Monetary System (EMS), following the suggestions of the then President of the European Commission, Roy Jenkins, the year before. The principle was agreed at the Bremen Council in the spring and the details agreed at the Brussels European Council in December. The arrangement came into force on 13 March 1979.

The key difference from the snake was that instead of being a dollar-based system it reflected purely intra-Community exchange rate fluctuations. At the heart of the system was the European Currency Unit (ECU) which was a weighted sum of the nine component currencies. (This followed on directly from European Unit of Account (EUA), a similarly weighted synthetic currency unit, which had been used internally in the Community in budgetary calculations.) The same ±2.25% bands were maintained, although for Italy a band of ±6% was instituted initially and the UK decided not to join in the exchange rate mechanism (ERM) part of the system. This last broke the link between the Irish punt and sterling. A European Monetary Cooperation Fund was also set up to ease ECU payments, with each country contributing 20% of its gold and foreign exchange reserves. Country weights in the ECU were recomputed at five year intervals, and Greece and then Portugal and Spain were included in the weights at the first opportunity after they joined the Community.

In the early years, fairly frequent alterations in parities were required, the first as early as September 1979 and then again in October 1981 and April 1982. By the time of the main problems with the EMS in 1992 there had been 12 realignments and none in the previous six years. The idea was that any country having difficulty maintaining its parity within the bands should start to intervene to keep within the limits when it had diverged by 75% of the permitted range. When it reached the edge of the range, intervention was supposed to be symmetric. However, in practice the burden of adjustment was placed largely on depreciating currency countries. Increasingly the system resembled a Deutschmark area, with West Germany setting interest rates for domestic purposes and the other countries having to follow suit in order to maintain their parities. As a result the EMS arrangements were amended by the Basle–Nyborg agreement of September 1987, which sought to encourage coordinated foreign exchange intervention and interest rate changes when a country approached the permitted limits of its parity. One important feature of the ERM was that changes in parities were intended to be decided by common consent and not by the country in difficulty unilaterally deciding where it would try to repeg its exchange rate. If that had been permitted there would have been a danger of competitive exchange rate changes and the system would not have been characterized by increasing stability.

Possibly the most significant feature of the EMS period was the development of the ‘private’ ECU, the issuing of ECU bonds and related instruments. Large corporates and indeed governments found it cheaper and more efficient to issue ECU-denominated bonds rather than to issue bonds in a number of the component countries. It was not necessary to be a member of the system to do so. One of the larger issuers for example was the UK government, even though it was not participating in the ERM. Similarly the international financial institutions also had ECU offerings. It was thus clear that there was a demand for such a currency. Hence, while the system was designed in immediate terms to try to achieve greater exchange rate stability among the members, it acted as an important step towards a European financial market.

The apparent stability of the ERM in the period from 1986 to 1992 in fact covered up some of the underlying tensions in the system. Exchange rate stability is only possible if the countries involved are subject to common shocks, to which they react in a reasonably similar manner. By the end of the 1980s this was no longer the case, particularly with the collapse of the former Soviet Union and the unification of East and West Germany. Much as the collapse of the Bretton Woods system was led by problems in the base country, the USA, so the collapse of the ERM was to quite a large extent driven by problems that were specific to Germany. Unification resulted in a major fiscal challenge, which resulted in the need to raise interest rates. In countries that did not share this need, the appropriate strategy would have been to devalue, but with the ERM commitment this was not welcome. Strains therefore built up and the system began to fall apart as markets speculated against each of the most exposed countries in turn, thereby forcing the devaluations.

It is ironic that, as discussed in the next section, the EU was simultaneously trying to put in place the next steps towards monetary union, with the negotiation and ratification of the Maastricht Treaty. The rejection of the treaty in a referendum in Denmark in July 1992 made the continuance of the present set of parities seem rather less likely. The initial problems occurred in September 1992, when Finland and Sweden faced problems as a result of their financial crises, which had erupted a year earlier. Although not members of the EU, they had both pegged their currencies to the ECU under the same terms as the member states, although of course without any commitment to reciprocal intervention. Finland floated, allowing a devaluation, but Sweden fought off the challenge by applying exceptionally high interest rates (the respite was only temporary and Sweden too floated after a second attack in November). Attention then turned to Italy, which was forced to devalue its parity. However, within a few days that new parity also looked unsustainable and the attacks were extended to the UK and Spain. On Black Wednesday, 16 September, the losses proved too great and the UK left the ERM, followed by Italy, but Spain, although devaluing, continued in the ERM. On 20 September France narrowly voted in favour of ratifying the Maastricht Treaty in a referendum. Speculation beforehand that the result might be rejection is likely to have contributed to the exchange rate pressures. But although France was itself subject to pressure it survived. Ireland, Portugal and Spain introduced exchange controls.

The exchange rate speculation continued and in mid-November Sweden gave up the struggle and floated. Spain and Portugal devalued three days later. Ireland devalued in January 1993, Spain and Portugal devalued again in May. However, it was clear that the pressure on all the remaining currencies except the guilder was likely to force further devaluations, and on 1 August the permitted bands of fluctuation were extended from ±2.25% to ±15%, which was sufficient to cope with the misalignment and more importantly allowed exchange rates to move far enough to choke off market pressure. (The Netherlands was able to continue with the narrower band.) While technically the ERM had survived, in practice floating had been required to survive the crisis. Fixing of exchange rates only came back as the member states moved to monetary union itself under the terms of the Maastricht Treaty.

The Road to the Euro Area

The increasing success of the EMS in the 1980s brought the ideas of moving towards monetary union onto the agenda again. At the beginning of his first Presidency of the Commission, Jacques Delors had canvassed a number of ideas for greater progress on European integration. The idea of completing the internal (or single) market came first, but monetary union was second. However, closer integration of product markets, which included financial services and labour markets as part of the single market programme, which was incorporated into the Single European Act in 1987, itself helped pave the way for monetary integration. The closer integration increased the extent to which the member states were likely to move together in economic fluctuations and increased the ability to respond to shocks through increased flexibility. The decision to try to move forward was made at the Hanover Council in June 1988. As in 1970 this also took the form of a Committee, to be chaired by Jacques Delors. However, the composition of the committee was completely different. It was composed of the central bank governors from each of the member states and two experts. This meant that it was dominated by the practical considerations of how to move to a single currency from the monetary perspective.

The resulting proposals had significant differences from their 1970 counterparts. In particular, they focused on creating the appropriate EU level institutions to implement such a currency. However, the framework was still one of economic and monetary integration, although the economic side did not involve matching EU level institutions. It was also to be achieved in three stages, echoing the Werner Report. The first stage was to concentrate on fiscal consolidation, greater convergence of macroeconomic policy and performance through closer coordination, completion of the single market, greater financial integration and coordination of monetary policies. The second stage, which would require a treaty change, would set up a European System of Central Banks (ESCB) and involve national monetary policies being executed with EC-level objectives in mind and harmonization of the tools of monetary policy. In the third stage, exchange rates would be irrevocably fixed and the ESCB would assume responsibility for monetary and exchange rate policy, with a pooling of reserves.

It was agreed to proceed with these ideas at the Madrid summit in June 1989 and commence Stage 1 on 1 July 1990 after the details had been sorted out by an intergovernmental conference. This conference produced the Treaty on European Union, which was approved at the Maastricht Council in December 1991.

The Treaty clarified two main issues: first it announced the creation of the European Monetary Institute, which was to come into being at the start of the second stage to prepare all the instruments and procedures for the single monetary policy to be followed by the European Central Bank as the EC level institution to implement policy in Stage 3; second it set out the timetable and a set of criteria for joining Stage 3. Stage 2 was to start in 1994 and Stage in 1997 if seven or more of the member states met the convergence criteria, or failing that in 1999 with as many states as met the criteria.

There were five criteria

  • Price stability: ‘a price performance that is sustainable and an average rate of inflation, observed over a period of one year before the examination that does not exceed by more than 1.5 percentage points that of, at most, the three best performing member states’.

  • Interest rates: ‘over a period of one year before the examination… an average nominal long-term interest rate that does not exceed by more than two percentage points that of, at most, the three best performing member states in terms of price stability’.

  • Budget deficits: the member state must not have an ‘excessive deficit’, which a protocol attached to the treaty defines as 3% of GDP but Council can override this if ‘either the ratio has declined substantially and continuously and reached a level that comes close to the reference value; or… the excess over the reference value is only exceptional and temporary’.

  • Public debt: the ratio of government debt should not exceed 60% of GDP ‘unless the ratio is sufficiently diminishing and approaching the reference value at a satisfactory pace’. The proviso was to be decided by the Council (using qualified majority voting). (It was also noted that the Council should take a medium term view, so just passing the reference value on the assessment date might not be enough.)

  • Currency stability: ‘respected the normal fluctuation margin provided for by the exchange rate mechanism… without severe tension for at least two years before the examination’.

These constitute a rather narrow ‘monetary’ view of what constitutes adequate convergence to be able to join a monetary union. This is clearly distinct from an ‘economic’ view, which would require real convergence in a number of key respects and the ability to respond flexibly to future shocks (described as asymmetric or idiosyncratic shocks that would affect that member state but not the EU as a whole) without the ability to use monetary policy. The real convergence would imply economic structures, policies and income levels. If these three were too different then a common policy would impose undue strains on the member state from common shocks that affected the whole monetary union. This focus on the monetary characteristics no doubt reflects the composition of the Delors Committee, but it also helps explain subsequent difficulties with the union.

Even within the monetary framework, there is no direct explanation of the fiscal criteria. A 60% debt to GDP ratio was around the average prevailing in the EU at the time and, with a 3% growth rate, a deficit of 3% a year would not worsen the position (after making a fairly sweeping assumption about the relationship between inflation rates and interest rates). Hence setting this as a minimum requirement would tend to imply an improving debt position. Furthermore, by restricting convergence to inflation rather than the price level left open the problem that, as countries move closer to a genuine single market, price levels can be expected to converge, which entails that subsequent inflation rates will be different until that process is complete.

The process of negotiating and ratifying the treaty was not straightforward. The UK insisted on an opt-out from the requirement to join monetary union, and a similar opt-out was accorded to Denmark after the rejection of the treaty in a referendum (a second referendum narrowly approved the revised proposals in May 1993). Thus although the treaty was agreed in December 1991 in Maastricht and signed in February 1992 in Limburg, it did not ultimately come into force until November 1993.

The process of convergence proved difficult, and at the first date of assessment in June 1996, for commencement in 1997, only Luxembourg qualified so there was no attempt at a formal examination. The EU had in the meantime increased its membership by three in 1995 with the accession of Austria, Finland and Sweden. By June 1998 the picture was very different. Finland, France and Luxembourg met all the criteria on a strict interpretation and Austria, Germany, Ireland, the Netherlands, Portugal and Spain were close to meeting the fiscal criteria. Belgium and Italy, with debt ratios of 122.2% and 121.6% respectively, were nowhere near, but nevertheless were admitted.

Greece had inflation 1.5% above the convergence criterion (and a debt ratio of 108.7% and a deficit of 4%), Denmark and the UK exercised their opt-outs (although both could have converged) and Sweden, having had membership of EMU rejected in a referendum, remained outside the ERM, thereby technically failing to qualify.

The Maastricht Treaty concentrated on the monetary side of EMU. Unlike the Werner recommendations, it did not agree for there to be an organization for the coordination or management of fiscal or other macroeconomic policies nor their interrelationship with monetary policy. Instead, it set out a general requirement for coordination of economic policy: ‘Member States shall regard their economic policies as a matter of common concern and shall co-ordinate them within the Council’. Over the ensuing years the process of macroeconomic coordination was slowly developed into a comprehensive scheme by a series of ‘processes’ whose individual names reflect the location of the Council meetings at which they were agreed: the Luxembourg process coordinating employment policies (1997); the Cardiff process coordinating structural policies (1998); and the Cologne process (1999) coordinating macroeconomic policies. These all operate under the framework of the Broad Economic Policy Guidelines, which were originally discussed annually but have subsequently had a three-year horizon. The important feature of these processes is that they do not compel action but draw up common objectives, areas of focus and principles for action, in what is known as the Open Method of Coordination. The Commission then monitors progress against the targets.

While the member states could manage to ‘coordinate’ their fiscal policies with the single monetary policy if the latter had clear objectives and a transparent and clearly articulated strategy for implementation, it was not felt possible to proceed simply through the coordination process, as countries might otherwise run profligate fiscal policies that would damage the creditworthiness of EMU as a whole. At the same time as the idea of the processes was launched at the Dublin Council in 1996, it was agreed to seek an approach to fiscal stability which in effect would ensure that the fiscal criteria laid down for entry to Stage 3 of EMU were perpetuated during its operation. This latter approach was agreed as the Stability and Growth Pact in 1997. The Pact had two elements to it, which have been labelled ‘preventative and corrective’. The preventative part involves the setting of longer term objectives for prudent fiscal policy and an annual process of surveillance by the Commission on progress, including the shorter term progress across the cycle. Thus the longer term aim is to keep the debt position steadily improving by ensuring that budgets are ‘close to balance or in surplus’ across the economic cycle and in the shorter term ensuring that at no stage does the budget deficit fall below 3% unless the country concerned is under substantial economic pressure.

The corrective part of the Pact involves the rules for avoiding and correcting any such ‘excessive deficits’ and is therefore labelled the Excessive Deficit Procedure. In the annual cycle of surveillance the Commission can opine that a country is likely to encounter an excessive deficit and then the Council of Economic and Finance Ministers (ECOFIN) can recommend that remedial action should be taken. If that action is not taken or is insufficiently applied, ECOFIN can in theory require an interest-free deposit of up to 0.5% of GDP and could convert this into a fine. This, however, has never been applied in practice and the lenient treatment of France and Germany when they got into difficulty in 2003 and the subsequent revision of the Pact in 2005 to make the criteria for excessive deficits softer could be taken to suggest that such sanctions are unlikely in future.

The Development of Monetary Union

An analysis of how Stage 3 of EMU has evolved since its inception at the beginning of 1999 lies beyond the scope of this article, but the experience of the period up to 2011 provides some insights into the structure and development of EMU up to that point. Three items stand out. The first is that in technical terms the design of the monetary side of EMU has been shown to be exemplary. There were no technical slip-ups or instability in financial markets and both the single monetary policy and the currency came into operation exactly as planned. Thus the framework set out by the committee of central bankers and the staged implementation through the EMI provided a workable template that others could build on. Having the institutional arrangement at the EU level was essential. The second issue that stands out is that the economic side of EMU has not proven particularly successful. There is no matching institution, as envisaged in the Werner framework. While fiscal behaviour since the mid-1990s has been a great improvement on that before, Greece and (to a lesser extent) Portugal have been unable to impose the fiscal stability desired and an emergency lending programme has been required in concert with the IMF to enable them to meet their debt obligations. (Ireland has also had debt problems, but to a major extent these are due to bad banking supervision and crisis management and only partly to an optimistic fiscal policy relying on continuing rapid growth.)

The third insight is that a focus on a narrow view of monetary convergence as a precondition for a successful economic and monetary union rather than a focus on the economic optimum currency area criteria has provided difficulties. Countries faced by different shocks in the global financial crisis have had difficulty adjusting as they no longer have the exchange rate as an adjustment mechanism. Countries joining with lower than average real income per head and lower price levels have found that while they experience faster growth, they also face faster inflation, as monetary policy focuses only on the rate of inflation for the EU as a whole. Since the MacDougall Report in 1977, the EU has shown little enthusiasm for fiscal equalization across countries and has not pursued anything like the scale of fiscal transfers observed in other large diverse countries with a monetary union, such as Australia, Canada, the USA and even Germany. Thus this route to adjustment, widely used elsewhere, has also not been available. The criteria for membership and their interpretation in 1998 reflected the political pressure for monetary union rather than simply an economic assessment. The changes to the proposed process of economic and monetary integration after the Werner Committee report in 1970 reflected the wish by the member states for more economic policy autonomy while pursuing tight exchange rate stability.

However, no satisfactory test of the success of EMU is possible, as it requires the ability to simulate a credible alternative, which would be a purely hypothetical exercise. Thus one can neither estimate with any reliability how the chosen form of EMU has fared by comparison with a Werner-style arrangement, perhaps with harsher criteria and hence fewer members or with a slower process that required a reasonable degree of real convergence and adherence to the optimum currency criteria. While the Werner vision may have taken three decades, and not one, to implement, EMU has been able to progress far faster and further than would have been thought likely in say 1985.

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