From Coal and Steel Community to Eurozone: An imperfect economic integration

Abstract

In the sixty years of the European integration, the process has evolved from being a simple European Coal and Steel Community, set up under the Paris Treaty in 1951, culminating in the most ambitious and far-reaching project ever achieved in Europe. The establishment of the Economic Monetary Union and the launching of a single common currency - the Euro - through the ratification of the Maastricht Treaty, in 1992, was expected to bring prosperity, growth and cohesion. However, despite the high prospects for success, member states have been challenged by significant changes - with unexpected consequences - concerning their monetary and fiscal policies. The creation of the Eurozone has gradually revealed enormous asymmetries, heterogeneities and divergences among member states due to the mandate settled by the European Central Bank and the constraints decided upon the Stability and Growth Pact, in 1997. Inevitably, the limits of European economic and political integration came to light, in 2009, when the Eurozone has been badly hit by a severe financial crisis that threatened the Euro’s survival. Since then, improvements have been taken but they are not enough for preventing a further crisis. Breaking-up the Eurozone is both simplistic and unconceivable for political, economic and procedural costs. Likewise, «muddling-through» with a precarious structure is unthinkable. Rather, fixing the Eurozone – it being «an irreversible step» - must be a priority in the medium-long term.