Making the European Monetary Union: The Role of the Committee of Central Bank Governors and the Origins of the European Central Bank

The roots of Europe’s economic meltdown are unearthed in this massive, illuminating study of the institution that was supposed to prevent it. Princeton historian James (The End of Globalization) traces the decades-long process by which the Committee of Governors of Europe’s national central banks incubated and then implemented the idea of a Europe-wide monetary union and common currency—which finally morphed into the European Central Bank. Drawing on extensive archival research, he recaps in dense detail the sharp policy debates between bank chiefs and sets them against the periodic European exchange-rate disruptions that goaded them toward monetary reform. Throughout, James highlights problems that would later precipitate the present-day euro crisis: imbalances between Germany’s trade surpluses and other countries’ deficits; clashes between independent central banks seeking price stability and inflationary government economic policies; the difficulty of imposing fiscal discipline on individual nations; lousy regulatory oversight of a surging European financial industry. James’s scholarly treatment requires some knowledge of banking and macroeconomic policy, but it is quite readable and even manages to convey the humanity of banking officials. The result is a lucid account of the labyrinthine topic of European Union monetary policy and its discontents. (Nov.)