Playing for High Stakes: The Eurozone Crisis

The EU had invested huge stakes in the creation of monetary union, which was agreed to in the Maastricht Treaty of 1992 and launched with 11 member states in 1999. By 2016 the eurozone area had grown to encompass 19 out of the 28 EU member states, only two of which had negotiated an opt-out, Britain and Denmark. Monetary union was a bold experiment in the absence of a European federal state in which to embed it. It depended on the effectiveness of the new European Central Bank (ECB) in delivering monetary stability and on the member states’ loyalty in complying with the rules to support the monetary union. The assumption was that monetary union would act as a catalyst for economic and political union. Clearly in creating monetary union in this way the EU was playing for high stakes. The onset and progression of the eurozone crisis cast serious doubt on the timing of this investment, on the underlying assumption that monetary union would drive economic and political union, and on the will and capability of eurozone states to cede the requisite sovereignty to form an economic and political union. The early signs were not auspicious. In 2003 the German federal government, the chief advocate of tough fiscal rules, had shown a willingness to see the application of these rules suspended (Heipertz and Verdun, 2010). Subsequently, in 2005 two key eurozone member states, France and the Netherlands, had rejected the Constitutional Treaty. With the escalation of the eurozone crisis, fear grew that monetary union could act as a catalyst for EU disunion (Dyson, 2012).