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Economic and Monetary Union: an Unexplored Case of Federalism Graduate Theses, Dissertations, and Problem Reports 2014 Economic and Monetary Union: An Unexplored Case of Federalism Alessandro Cagossi West Virginia University Follow this and additional works at: https://researchrepository.wvu.edu/etd Recommended Citation Cagossi, Alessandro, "Economic and Monetary Union: An Unexplored Case of Federalism" (2014). Graduate Theses, Dissertations, and Problem Reports. 591. https://researchrepository.wvu.edu/etd/591 This Dissertation is protected by copyright and/or related rights. It has been brought to you by the The Research Repository @ WVU with permission from the rights-holder(s). You are free to use this Dissertation in any way that is permitted by the copyright and related rights legislation that applies to your use. For other uses you must obtain permission from the rights-holder(s) directly, unless additional rights are indicated by a Creative Commons license in the record and/ or on the work itself. This Dissertation has been accepted for inclusion in WVU Graduate Theses, Dissertations, and Problem Reports collection by an authorized administrator of The Research Repository @ WVU. For more information, please contact [email protected]. Economic and Monetary Union: an Unexplored Case of Federalism by Alessandro Cagossi Dissertation Submitted to the College of Arts and Sciences at West Virginia University in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy in Political Science Donley T. Studlar, Ph.D. Chair Robert Blobaum, Ph.D. Robert D. Duval, PhD. Joe D. Hagan, Ph.D. Karleen A. West, Ph.D. Department of Political Science Morgantown, West Virginia 2014 Keywords: European Union, Economic and Monetary Union, Federalism Copyright 2014 Alessandro Cagossi Abstract This dissertation is intended to shows how federalism can be a useful theoretical tool to conceptualize the overall evolution of Economic and Monetary Union (EMU) from its inception to the current attempts (as of April 2014) to tackle the financial crisis that has affected the Eurozone since 2010. The topic is important because no detailed studies are yet available using a federalist focus on EMU. This research, therefore, is aimed to fill a gap in the literature currently approaching economic and monetary integration. The dissertation draws on the assumptions found in the current mainstream literature on European integration. In this regard, monetary union has been already analyzed from different theoretical perspectives, such as neo-functionalism, Multi-Level Governance, Europeanization, intergovernmentalism, and domestic politics theory. Such theories sometimes conflict with each other and sometimes partially overlap, but all have some weaknesses. On the contrary, I believe that applying federalism to EMU encompasses other contending approaches in one theoretical focus, providing a parsimonious, structural, and multilayered explanation able to elucidate the overall EMU evolution. Analyzing “how” EMU has been politically developed, EMU policies have been implemented, and EMU polity has changed over the decades, my main hypothesis is that the incremental writing of the “rules of the game” has been made possible by the European Council through horizontal federalism (“the method”). Horizontal federalism has almost always strengthened EC/EU institutions and targeted the vertical centralization of economic and monetary affairs (“the outcome”). As such, horizontal and vertical federalism elicited an incremental and steady federalization of EMU (“the process”) that is lasting from the 1950s to nowadays. Concerning the methodology, in order to demonstrate the validity of my hypothesis, I utilize two interconnected qualitative methods: process tracing is the basis of the narration of the empirical process pertaining to the EMU, while structured focused comparison will allow me to compare the various integration theories identified above, including federalism, using EMU as the case study. These methods follow primary research consisting of a collection of original data, analysis of official documents and original reports on EMU, and unstructured interviews were conducted with technocrats, scholars, diplomats, and policy-makers. ii Table of Contents List of Tables and Figures …………………………………………………..……………………………………………. v List of Acronyms ………………………………………………..…………………………………………………............. vi 1. Introduction ………………………………………………………………………………………………. 8 1.1 Establishing the Importance of EMU …...…………………………………………………………………… 8 1.2 Synopsis of the Literature on EMU Integration ...………………………………………………………….. 14 1.3 Federalism and EU Studies ……………………………………………………………………...................... 17 1.4 Research Questions, Hypotheses and Methods …………………………………………………………….. 22 1.5 Significance and Limitations of the Dissertation ...………………………………………………………… 28 1.6 Chapters Outline ..……………………………………………………………………………………………… 32 2. Methodological Note: Process Tracing and Structured Focused Comparison …...………………….. 35 2.1 The Deductive Nature of the Research Design ……………………………………………………………... 35 2.2 The Evolution of EMU through Process Tracing …………………………………………………………... 37 2.3 The Structured Focused Comparison and Data Collection ………………………………………………. 40 3. Defining Federalism and its Application to EU Studies………………………………………………... 43 3.1 Introduction: a Multidimensional Concept ………………………………...……………………………….. 43 3.2 An Academic Theoretical Approach ………………………………………………...……………………….. 44 3.3 A Normative Political Concept ……………………………………………………………………………….. 50 3.4 Applied to EU Studies ………………………………………………………………………………………….. 53 3.5 Conclusion: Filling a Theoretical Gap ……………………………………………………………………… 56 4. The Evolution of Economic and Monetary Integration in Four Stages …………………………......... 58 4.1 Introduction: a Long and Thorny Journey …………………………………………………………... 58 4.2 The Onset of Economic Integration and the First Experiments of Monetary Coordination (1950s-1968) 61 4.3 The Steps towards an Economic Union and a Single Currency (1969 to 1999) …………………….. 85 4.4 Monetary Unification in Practice since 1999 ………………………………………………………. 113 4.5 Tackling the EMU Crisis since 2008: Euro Survival under Threat ………………………………… 125 4.6 Conclusion: More Crises? More Integration ...................................................................................... 145 iii 5. Explaining Economic and Monetary Union: Various Approaches ………………………………....… 147 5.1 Introduction: Supranational, State-Centric and Mixed Paradigms ………………………………… 147 5.2 Supranational Paradigms ……………………………………………………………………........... 150 5.2.1 Neo-functionalism …………………………………………………………………………... 150 5.3 State-Centric Paradigms …………………………………………………….…………………….... 155 5.3.1 Intergovernmentalism ………………………………………………………………………. 155 5.3.2 Domestic Politics Theory …………………………………………………………………… 162 5.4 Mixed Paradigms …………………………………………………………………………………… 168 5.4.1 Europeanization …………………………………………………………………………….. 168 5.4.2 Multi-Level Governance (MLG) ……………………………………………………………. 172 5.5 Conclusion: why Mixed Paradigms Work Better to Explain EMU ………………………………… 177 6. Explaining Economic and Monetary Union Using Federalism ……………………………………….. 181 6.1 Conceptualizing Federalism and Testing it to EMU Policy, Policy and Politics ………………….….. 181 6.2 The Incremental Federalization of Economic and Monetary Affairs from the 1950s to 1968 ……. 188 6.3 Towards a Single Currency: Federalization of Monetary Issues (1969-1998) ……………………. 194 6.4 The Achievement of Monetary Union: Federalism in Action since 1999 ………………………….. 201 6.5 Tackling the EMU Crisis since 2008 Targeting Federalist Solutions ……………………………… 206 6.6 Conclusion ………………………………………………………………………………………….. 221 7. Conclusion ………………………………………………………………………………………………... 228 Bibliography ………………………………………………………………………………………………….. 240 Appendix ……………………………………………………………………………………………………… 268 iv List of Tables Table 1 – Real GDP growth rate (volume) - Percentage change on previous year. Table 2 – Overview on EFSM AND EFSF loan disbursements Table 3 – Classification of mainstream theories in three broad paradigms. Table 4 – Explanatory leverage of three paradigms on EMU polity, policy and politics (at – supranational and domestic levels) in historical perspective. Table 5 – Predictions of European integration theories on EMU polity, policy and politics. Table 6 – Explaining EMU using a federalist structure (1950s-1968). Table 7 – Explaining EMU using a federalist structure (1969-1998). Table 8 – Explaining EMU using a federalist structure since 1999. Table 9 – Explaining EMU using a federalist structure since 2009. Table 10 – Explaining EMU using a federalist structure. List of Figures Figure 1 – The “Snake in the Tunnel”. Figure 2 – The “Cooperation Procedure”. v List of Acronyms AEF – Action Européenne Fédéraliste BoP – Balances of Payments Assistance CACs – Collective Action Clauses CAP – Common Agricultural Policy CFSP – Common Foreign and Security Policy CRIS – Financial, Economic and Social Crisis Committee CRU – Composite Reserve Unit EA17 – Euroarea with 17 members (since 2011) EBA – European Banking Authority EC – European Community ECB – European Central Bank ECBS – European Central Bank System EcoFin – Economic and Financial Council ECSC – European Coal and Steel Community ECU – European Currency Unit EDA – European Debt Agency EDC – European Defence Community EDP – Excessive Deficit Procedure EEC – European Economic Communities EFC – Economic and Financial Committee EFSF – European Financial Stability Facility EFSM – European Financial Stabilisation Mechanism EFTA – European Free Trade Association
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