| The Euro: The Politics of the New Global Currency |
| David Marsh, Yale University Press, 2009, 352 pages, £25. |
| Those who recall David Marsh’s excellent The Bundesbank: The Bank that Rules Europe, which was published back in 1992, will have high hopes for his recently-published The Euro. The earlier book told the story of the German central bank’s evolution during the post-war period into the absolute epitome of central banking counter-inflation ‘credibility’. Marsh’s new book relates the story of how European monetary union – and, in particular, its central bank the ECB – came into being and has subsequently fared. |
| Thankfully, those who entertain such high hopes won’t be disappointed. Organised chronologically rather than thematically, successive chapters take the reader on an insightful journey from the earliest aspirations for European economic and political union right through to the creation of the single currency in 1999. The penultimate chapter focuses upon how EMU has fared in the decade since its inception. And the final chapter takes stock of the achievement thus far and concludes by offering up some predictions for the future. |
| It should be emphasised that the book’s focus is upon the politics behind the creation, and subsequent development, of the euro. Accordingly, economists won’t find any detailed discussion of the economic thinking and rationale behind the Euro project, the Stability Pact fiscal rules or the modus operandi of the ‘twin pillar’-focused ECB. |
| Nor, in his concluding chapter where he looks ahead, does Marsh address the increasingly central question of how intra-EMU imbalances and mal-adjustments – notably the way in which the rate of growth of German production costs have increasingly undershot those in the other major EMU economies, especially those of Italy and Spain – will be resolved in future. Neither is the risk of EMU break-up discussed in any systematic fashion. |
| This, however, isn’t to belittle Marsh’s achievement. What he purports to analyse and explain, he does extremely well. As was the case in his earlier book, Marsh draws heavily upon archival research and, in particular, upon interviews with most of the key players involved, whether they be politicians, government officials or central bankers. Many of these interviewees spoke off the record but a surprising number didn’t and your reviewer was frequently surprised by the retrospective candour displayed. |
| Such invaluable source material drives the detailed narrative of how the original vision of economic and monetary union came eventually to fruition (it was, of course, hardly smooth sailing, to say the least), casting fresh and illuminating light upon pivotal ‘landmark’ events on the road to EMU. |
| Especially interesting in this regard is Marsh’s treatment of the consequences of German unification for the ERM and the Franco-German-British political tensions which contributed so powerfully to the UK throwing in the towel and allowing the pound to float in 1992. |
| Importantly, the author succeeds in making what could have been an exceedingly dry subject into a powerful and enthralling read. And any reader will derive much insight and enjoyment from the unfolding narrative. His history of how what is now the world’s second largest reserve currency came into being and has developed during the first decade of its life deserves to be read widely. |
| Ian Harwood |
| Chief Economist, Evolution Securities |