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The globalised world trade order was always vulnerable to a situation where any country or group of countries could decide that following the rules would not serve their near-term interests. Globalisation led to large trade imbalances. Surplus accumulation led to an increase in global excess savings and a decline in global real rates. This fall in real rates contributed substantially to the challenges experienced by monetary policy. The social consequences manifested themselves in a secular loss in bargaining power for labour in advanced economies. Large segments of the public in Western countries justifiably felt they had been “left behind” by globalization. Globalisation not only failed to spread liberal values, because democracy and freedom do necessarily travel with goods and services, but also weakened them in the countries that were its strongest proponents. This period of profound change in the global economic order comes with equally profound challenges for economic policy. It is likely that we will experience more frequent, lumpier and also larger negative supply shocks. These supply shocks are likely to emanate not only from new frictions in the global economy, but even more so from our policy response to mitigate those frictions. Fiscal policy will be called upon to play a greater role: a world of supply shocks makes monetary stabilisation more difficult. Demands for policy coordination are likely to increase, which is something our macroeconomic policy architecture is not designed to deliver. There must be a clear and credible fiscal path ahead that focuses on investment; central banks should ensure that the primary compass for their decisions is inflation expectations.

La economía de la zona del euro continúa creciendo a un ritmo moderado, pero sostenido, y los mercados de trabajo están mejorando asimismo gradualmente, en particular también aquí, en España. Se espera que esta tendencia gradual al alza se mantenga, entre otras cosas gracias a nuestras medidas de política monetaria. Pero el crecimiento de la productividad continúa siendo muy débil. Mientras en 1995 el crecimiento de la productividad en la zona del euro igualaba al del resto del mundo, con una cifra de en torno al 2 %, en este momento, con menos del 0,5 %, se queda atrás respecto a las tasas de crecimiento de Estados Unidos y otras economías avanzadas y mercados emergentes.

We at the European Central Bank (ECB) are continuing to maintain price stability, which is the foundation of growth and job creation. We have introduced new measures to ensure price stability by removing unfounded fears about the euro area. These measures are supporting financial market sentiment while deeper reforms are implemented across the euro area.

Intro -- Contents -- List of Figures -- Foreword by Mario Draghi and Jaime Caruana -- Abbreviations Used in Text -- Introduction: The Making of a Non-National Currency -- 1. A Napoleonic Prelude -- 2. The Origins of the Committee of Governors -- 3. The Response to Global Monetary Turbulence -- 4. The Snake and Other Animals -- 5. Negotiating the European Monetary System -- 6. The Malaise of the 1980s -- 7. The Delors Committee and the Relaunching of Europe -- 8. Designing a Central Bank -- 9. The EMS Crises -- Conclusion: The Euro and the Legacy of the Committee of Governors -- Appendix A: Maastricht Treaty Text and Committee of Governors' Draft of the Statute of the European Monetary Institute -- Appendix B: Maastricht Treaty Text and Committee of Governors' Draft of the Statute of the European Central Bank -- Appendix C: Dramatis Personae -- Appendix D: Members of the Committee of Governors -- Appendix E: Committee for the Study of Economic and Monetary Union (Delors Committee), 1988- 1989 -- Appendix F: Chairmen of the Monetary Committee of the European Community, 1958- 1998 -- Appendix G: European Commission Presidents and Commissioners for Economics and Finance, 1958- -- Appendix H: Chronology -- Appendix I: Interest Rates and Fiscal Balance -- Notes -- Acknowledgments -- Index.

The current economic crisis has revealed the shortcomings of the current global financial system, and it is clear that there must be a fundamental shift in the approaches to global financial governance. The seeds for a more comprehensive global system have been sown, as evidenced by the increasing amount of international dialogue, not only amongst the global economic giants but also amongst emerging economies. However, there is a need to develop mechanisms for high-quality regulation rather than falling into the trap of reacting to the current crisis.

Europe’s financial crisis cannot be blamed on the Euro, James contends in this probing exploration of the whys, whens, whos, and what-ifs of European monetary union. The current crisis goes deeper, to conundrums that were debated but not resolved at the time of the Euro’s invention. And, Euro or no Euro, these clashes will continue into the future.