National Economic Sovereignty and the Single European Currency

Considers how membership of a Single European Currency would affect Single European Currency members’ national economic sovereignty. First defines concisely national economic sovereignty. Explores economic life in the Single European Currency. A picture of a converged Single European Currency area economy emerges. Then considers what influence Single European Currency members would have on the Single European Currency area’s macroeconomic policy, finding members’ influence, their national economic sovereignty, depends on the Single European Currency’s institutional structure. Explores three institutional structures, a Council of Ministers approach, a federal approach and the Maastricht plan, the European Union’s (EU’s) actual plan for the Single European Currency. Finds that both a federal and a Council of Ministers approach appear to offer Single European Currency members some degree of national economic sovereignty, while the Maastricht plan appears to offer Single European Currency members very little national economic sovereignty. Analyses the Exchange Rate Mechanism (ERM), to assess what national economic sovereignty EU countries currently enjoy. It becomes apparent that in order to prevent excessive exchange rate instability EU countries must set their monetary policies to the satisfaction of the Financial Market, EU free capital mobility undermining EU countries’ national economic sovereignty. The ERM’s and the Maastricht plan’s preference for price stability over democratic accountability leads to an investigation of the significance of a economy’s average inflation rate. Finds evidence of a negative correlation between EU countries average inflation rates and their private sectors level of profitability. Concludes by asking if a Single European Currency, which favours enforcement of price stability over democratic accountability, is good for European business or not.