DP1458 The Prospects of a Mini Currency Union in 1999

Author(s): Paul De Grauwe
Publication Date: September 1996
Keyword(s): Maastricht Treaty, monetary integration
JEL(s): F33, F36, F42
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1458

In this paper we analyse the prospects of a mini currency union in Europe. We argue that the Maastricht strategy will create a situation in which the countries excluded from the EMU will use their negative voting power to bar the entry of a number of core countries into the union. The countries excluded will have a strong legal basis to do so because several core countries will fail one or more Maastricht convergence norms. Thus, the scenario that the financial markets believe in today is highly unrealistic. Instead countries will be confronted with the choice of a maxi currency union or no currency union.