The Politics of Central Banks: Austerity and Unemployment in Europe

1988 ◽  
Vol 8 (1) ◽  
pp. 21-48 ◽  
Author(s):  
Paulette Kurzer
Keyword(s):  
The Netherlands ◽  
Policy Process ◽  
European Monetary System ◽  
Central Banks ◽  
Small Open Economies ◽  
European Monetary ◽  
Social Democratic ◽  
Monetary System ◽  
The Common ◽  
Fiscal Austerity

ABSTRACTThis article examines the divergences in labor market-performances in four small, open economies: Austria, Belgium, the Netherlands, and Sweden. It argues that great unemployment in Belgium and the Netherlands is partly due to the implementation of deflationary policies during the 1980s. The decline of Keynesian intervention in Belgium and the Netherlands is traced to the institutional independence of their central banks to set monetary and exchange rate policies separate from government. Because the Swedish and Austrian central banks are more integrated in the policy process and their countries are not members of the Common Market or the European Monetary System, social democratic governments have been able to go against the European trend of monetary restrictiveness and fiscal austerity. Accordingly, business in Austria and Sweden is more optimistic about future profit returns and is more willing to invest in productive capital, resulting in lower unemployment.

scholarly journals Europe 1957 to 1979: From the Common Market to the European Monetary System

2019 ◽  
pp. 1-36 ◽  
Author(s):  
Joseph Halevi
Keyword(s):  
Political Culture ◽  
European Monetary System ◽  
Domestic Demand ◽  
European Monetary ◽  
Italian Economy ◽  
Monetary System ◽  
Tentative Explanation ◽  
The Common ◽  
The 1960S ◽  
De Gaulle

This essay deals with the contradictory dynamics that engulfed Europe from 1959 to 1979, the year of the launching of the European Monetary System. It focuses on how the macroeconomic framework of stop-go policies in the 1960s ended up privileging external – intra-European - exports at the expense of domestic demand. The paper offers a very tentative explanation as to why stop-go policies, by weakening domestic demand, did not put an end to the to the ‘long boom’ earlier as they should have. The French crisis of 1968-69 leading to the demise of De Gaulle is discussed at length, as is the renewal of the German export drive in the wake of a nominal revaluation of the D-Mark in 1969. Finally, the revival of labor struggles in Italy in the same year is put in the context of the structural weaknesses of the Italian economy as analyzed by the late Marcello de Cecco. The conclusion is that European countries had neither the political culture nor the institutional mechanisms to coordinate mutually advantageous policies. Their so-called cooperation was an exercise in establishing hegemony while defending the interests specific to the dominant economic groups of each country. The essay then deals with the formation of the EMS as an expression of efforts to establish and enforce economic dominance.

Europe's monetary malaise: international institutions and domestic policy commitments

1996 ◽  
Vol 22 (3) ◽  
pp. 257-273 ◽  
Author(s):  
Wayne Sandholtz
Keyword(s):  
Exchange Rate ◽  
International Institutions ◽  
European Monetary System ◽  
Central Banks ◽  
European Monetary ◽  
Exchange Rate Mechanism ◽  
Monetary System ◽  
The Uk ◽  
Belgian Franc ◽  
Rate Mechanism

A yearlong nightmare for the European Monetary System (EMS) began in September 1992. Amid name–calling, finger–pointing, and hand–wringing, the British pound and the Italian lira dropped out of the Exchange Rate Mechanism (ERM). In succeeding months, virtually every other ERM currency came under attack.1 Three of them—the Spanish peseta, the Portuguese escudo, and the Irish punt—devalued within the system. Three others—the French franc, the Belgian franc, and the Danish krone—avoided devaluation, but only at the price of recurrent and costly rounds of intervention by multiple central banks. Finally, in August 1993, the defenders of the parities surrendered. The twelve EMS countries agreed to expand the fluctuation margins from 2.25 per cent on either side of parity (6 per cent for Spain, Portugal and the UK) to 15 per cent on either side of parity. The wider margins eliminated the potential for speculative attacks, but left the system only the thinnest veneer of exchange rate coordination. This article seeks not to assess the causes of the crisis but rather to explain why the EMS governments did not defuse it with a realignment—the mechanism built into the ERM for precisely such occasions.

scholarly journals Making a virtue of necessity? The economics and politics of the ECB’s monetary policy, 1999-2019

2020 ◽  
pp. 37
Author(s):  
Nikos Koutsiaras
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
European Monetary System ◽  
Central Banks ◽  
Central Banking ◽  
Structural Reforms ◽  
European Monetary ◽  
Slow Pace ◽  
Monetary System ◽  
Economics And Politics

The ECB could hardly afford political neutrality, even in the monetary union’s “honeymoon phase”. Being a stateless central bank entailed striking compromises between confl icting (national) monetary policy preferences. However, such compromises would often be reached at the expense of theoretical consistency and to the detriment of coherence in the ECB’s monetary policy strategy. And, perhaps inevitably, they would also bear the mark of the dominant partner in the European Monetary System, that is prior to the establishment of the monetary union, now also being the biggest subscriber to the ECB’s capital. Political neutrality and, for that matter, monetary activism on the part of the ECB -as well as liquidity in the euro-area- were largely inadequate during the euro area crisis, especially in its early phase. They were subsequently increased, but at a slow pace and in a preferential fashion, that is, largely to the benefi t of the banking industry. Eventually, the ECB did try to make a virtue of necessity; yet, this could only go so far. Thus, the ECB has reluctantly become the only game in town, its reluctance being mostly associated with the overriding concerns of certain national central banks of the Eurosystem, most notably the Bundesbank; namely, ensuring monetary dominance, averting (at that time illusory) infl ationary dangers, preventing moral hazard, enforcing structural reforms and, not least, fending off any, indirectly emerging, type of transfer union. Therefore, the ECB could have no great ambitions; its lonely game was unlikely to produce a medal-winning policy maker in the world championship of central banking.

The European Monetary System

1979 ◽  
Vol 87 ◽  
pp. 5-12 ◽  
Keyword(s):  
European Monetary System ◽  
Striking Feature ◽  
House Of Commons ◽  
European Monetary ◽  
Monetary System

The most striking feature of the Bremen proposals for a new European Monetary System (EMS) was the scepticism, and in many cases hostility, with which they were received by professional economists. The main positions on macro-economic questions—orthodox, monetarist and international monetarist—were all represented among the economists who submitted written evidence to the House of Commons Expenditure Committee, when it examined the EMS proposals last November. All doubted whether the proposals, so far as they were then known, could work, and some predicted an early breakdown. Some took the view that, even if the scheme could work, it would not be to Britain's advantage to join. Such convergence of opinion among professional economists, with monetarists and Keynesians appearing to be in the same camp, is sufficiently unusual to deserve notice. Nor is this just an example of the British giving voice to the prevalent anti-European feeling. German economists, represented for example by the five Institutes, have been similarly sceptical.

scholarly journals Le système monétaire européen : Le point de vue européen

2005 ◽  
Vol 12 (3) ◽  
pp. 533-547 ◽  
Author(s):  
Michel Lelart
Keyword(s):  
Interest Rates ◽  
International Monetary System ◽  
European Monetary System ◽  
The United States ◽  
European Monetary ◽  
International Capital Markets ◽  
Monetary System ◽  
American Interest ◽  
International Environment ◽  
The Stability

The evolution of the international monetary System prompted the nine members of the E.E.C. to establish a European Monetary System. The new statutes of the I.M.F. have in fact legalized the practice of flexible exchange rates and sanctioned the dollar's inconvertibility while eliminating the role of gold. Further, the increasing importance of the international capital markets fosters the unlimited expansion of international liquidities. it is in response to this context then that Europe seeks to create a zone of stability and to manage its own international tender in accordance with rules that it has set for itself. The author draws a positive conclusion as the System has operated without major problems so far. Nevertheless, difficulties remain: the international environment has not improved given the abrupt strengthening of the dollar and the increase in American interest rates. In addition, progress with regard to cooperation among the Nine remains slow and political change in France makes any prognosis respecting the future of the European Monetary System difficult. It was anticipated that the System would be Consolidated rapidly. It would in that event contribute more effectively to the stability of the international monetary System. It could, on the other hand, sharpen competition between Europe and the United States, between the Ecu and S.D.Rs. and between the European Monetary Fund and the International Monetary Fund.

Exchange risk premia in the European monetary system

2000 ◽  
Vol 10 (4) ◽  
pp. 351-360 ◽  
Author(s):  
Frederick G. M. C. Nieuwland ◽  
Willem F. C. Verschoor ◽  
Christian C. P. Wolff
Keyword(s):  
European Monetary System ◽  
Risk Premia ◽  
European Monetary ◽  
Monetary System ◽  
Exchange Risk
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