Birth of the European Monetary Union Project Summary

  • Last updated on November 10, 2022

The Bretton Woods system, created in 1944, had largely determined international European monetary policy from the end of World War II until it began to fail in the late 1960’s. The leaders of the European Economic Community, meeting at the Hague Summit, therefore determined that the Common Market should begin moving toward more intense economic integration and monetary union.

Summary of Event

A constellation of events preceded the Hague Summit of December, 1969, which attempted to breathe new life into the European Economic Community (EEC), setting it on the path of integration and financial cooperation that would later lead to the formation of the European Union. In May, 1968, students revolted in the Parisian suburb of Nanterre, barricading the streets and rocking the French capital itself. Workers demonstrated a momentary solidarity with the students, and the country was effectively brought to a standstill in a summer of strikes and counter-protests. Charles de Gaulle had been president of France since 1958—the very year of the Rome Treaties, which had launched the EEC. De Gaulle withstood the immediate tide of 1968 but was undone not long thereafter. He turned a lost plebiscite on minor constitutional changes into a vote of no confidence for his administration and resigned from office in late April, 1969. Hague Summit (1969) European Economic Community Economic unions Economic policy;Europe European Monetary Union [kw]Birth of the European Monetary Union Project (Dec., 1969) [kw]European Monetary Union Project, Birth of the (Dec., 1969) [kw]Monetary Union Project, Birth of the European (Dec., 1969) [kw]Union Project, Birth of the European Monetary (Dec., 1969) Hague Summit (1969) European Economic Community Economic unions Economic policy;Europe European Monetary Union [g]Europe;Dec., 1969: Birth of the European Monetary Union Project[10580] [g]Netherlands;Dec., 1969: Birth of the European Monetary Union Project[10580] [g]France;Dec., 1969: Birth of the European Monetary Union Project[10580] [g]Germany;Dec., 1969: Birth of the European Monetary Union Project[10580] [g]West Germany;Dec., 1969: Birth of the European Monetary Union Project[10580] [g]Italy;Dec., 1969: Birth of the European Monetary Union Project[10580] [g]Belgium;Dec., 1969: Birth of the European Monetary Union Project[10580] [g]Luxembourg;Dec., 1969: Birth of the European Monetary Union Project[10580] [c]Banking and finance;Dec., 1969: Birth of the European Monetary Union Project[10580] [c]Diplomacy and international relations;Dec., 1969: Birth of the European Monetary Union Project[10580] [c]Economics;Dec., 1969: Birth of the European Monetary Union Project[10580] [c]Trade and commerce;Dec., 1969: Birth of the European Monetary Union Project[10580] Gaulle, Charles de [p]Gaulle, Charles de;resignation from presidency Brandt, Willy Pompidou, Georges Werner, Pierre Kiesinger, Kurt Georg

The demonstrations of May, 1968, and the resignation of President de Gaulle opened the road to what was labeled “the spirit of the Hague.” Twice—in 1963 and 1967—de Gaulle had vetoed the United Kingdom’s accession to the EEC. He had also forced the Luxembourg Compromise, which endorsed absolute majority voting on virtually all important community business. Though there were signs that he had already begun revising some of his earlier stances, de Gaulle’s exit removed an imposing obstacle to the EEC’s development. Georges Pompidou, his successor and France’s former prime minister, shared many of de Gaulle’s political perspectives. He was a “gaulliste,” but EEC obstructionism was not on his agenda. The same year that Pompidou became president, Willy Brandt, a socialist with impeccable anti-Nazi credentials, replaced Kurt Georg Kiesinger, a Christian Democrat and former Nazi, as Chancellor of the German Federal Republic (West Germany). This along with de Gaulle’s departure helped give the impression that change was afoot in western Europe.

Hoping to capitalize on the momentum created by the changes in leadership in France and West Germany, Europe’s leaders began to talk of a summit meeting. The meeting—bringing together the heads of state of France, West Germany, Italy, Belgium, Luxembourg, and the Netherlands—took place in the Hague in December of 1969. It set a precedent that would, in 1975, become institutionalized in the biannual conferences of the then newly created European Council.

The Hague Summit introduced another pole of power into the EEC, reducing to a certain degree the authority of the European Commission and its president. Beyond that, the summit’s agenda was also important for linking three disparate items together. First was the question of “enlargement.” This addressed the welcoming of the United Kingdom into the EEC fold, a community from which the British had been spitefully excluded on some occasions and had remained willfully aloof on others. British entrance to the EEC was not formally sealed until 1973, but it was the Hague Summit that officially reopened negotiations.

West German Chancellor Willy Brandt was one of the prime movers behind the creation of the European Monetary Union.

(The Nobel Foundation)

Meanwhile, although German chancellor Brandt was the unquestioned center of the conference once things got underway, Pompidou, in the runup to the actual event, managed to connect the question of British accession to other French concerns. This ploy led to the second set of important agenda items, which was the question of “completion.” Pompidou was adamant about safeguarding agricultural-import subsidies—referred to within the EEC as the Common Agricultural Policy Common Agricultural Policy (CAP). These subsidies greatly benefited France’s farming sector. As a supplement to the income derived from the CAP, leaders also proposed a value-added tax Value-added taxes[Value added taxes] (VAT) on sales within the EEC. The VAT would help pay for the day-to-day administrative costs of running the community, while also providing funds for other projects.

Third and perhaps most significant in retrospect, was the issue of “deepening.” The Hague Summit itself did very little immediately to forward the issue of economic and monetary union. However, the press communiqué released at the conclusion of the meeting underscored its importance. This communiqué ultimately represented a seed that, over the next decades, would result in the creation of the European Monetary Union (EMU) and its common currency, the Eurodollar (euro). Before that could happen, however, a heated debate had to take place over the proper path to creating something as potentially disruptive as a new and common currency. This debate pitted the “Economists” against the “Monetarists.”

The Economists were best represented by West Germany and its Bundesbank, a national institution that historically had adamantly defended its autonomy against central government interference. In the lead-up to the creation of a common currency, the Economists favored a long gestation period, one in which EEC countries would merge and coordinate their respective economic policies. The Economists favored a strong currency and anti-inflationary principles. Other EEC members sharing the German outlook were the Netherlands and, prior to 1970, Italy. These were countries that possessed a favorable balance of trade.

Taking opposition to the Economists were the Monetarists. In this camp were France, Belgium, and, after 1970, Italy. Great Britain, once it had joined the EEC in 1973, also sided with this group, but only prior to Margaret Thatcher’s assumption of power in 1979. These member-states supported the creation of a common currency, after which, they argued, the merger and coordination of economic policies would occur naturally and almost necessarily. They favored a weak currency and inflationist policies, and other policies that were likely to produce deficits in trade.

The Hague Summit sanctioned the creation of a committee to study these two competing paths of economic development and to recommend which one to adopt. The result was the Werner Report, drawn up in October, 1970, under the guidance of Pierre Werner, prime minister of Luxembourg. Opinion in this document strongly sided with the position of the Economists. Though the immediate plans of pursuing EMU were derailed by the global economic crises of the 1970’s, the Hague Summit would later be regarded as a turning point in the course of the EEC. Curiously, the policies of the German Bundesbank and the Economists would hold sway in the interval, promoting the notion that a long interim of economic convergence was desirable prior to the creation of EMU, not vice-versa.

Significance

The Hague Summit represented an important juncture in the postwar reconstruction of Europe. The Bretton Woods system Bretton Woods system had previously shown some signs of weakness, but its flaws were exacerbated in the late 1960’s. A climate was created in which the EEC sought to remedy its fiscal problems by lessening its dependence on transatlantic ties. The United States itself was turning inward, preoccupied with a troubled economy, a weakened dollar, and an escalating and unpopular war in Vietnam. The summit helped create the tools with which Europe’s capitalist powers would be able to fend for itself.

Any optimism or euphoria produced by the bold statements of the Hague Summit was quickly blanketed, however, by the oil crisis of 1973. The crisis effectively brought a rapid conclusion to the European “economic miracle” of the postwar era. In its aftermath, however, despite the loss of forward momentum in Europe’s economic growth and integration, the question of EMU came to the fore. The EEC was forced by circumstance to follow the path of the German Economists, who counseled achieving macroeconomic convergence before creating a common currency.

Earlier in 1969, West German chancellor Willy Brandt launched his Ostpolitik, or Eastern Policy, which sought to normalize West German relations with East Germany and the Soviet Union. This policy represented a major shift in Cold War relations, the final result of which would be the reunification of the two Germanies. Though the euro itself would not be put into circulation until 2002, one of its more important roots was to be found in the Hague Summit of December, 1969, when an idea proved more important than any immediate action. Hague Summit (1969) European Economic Community Economic unions Economic policy;Europe European Monetary Union

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Dinan, Desmond. Europe Recast: A History of European Union. Boulder, Colo.: Lynne Rienner, 2004. Intensive but accessible examination of the long road to the Maastricht Treaty of the early 1990’s and beyond.
  • citation-type="booksimple"

    xlink:type="simple">Gillingham, John. European Integration, 1950-2003: Superstate or New Market Economy? New York: Cambridge University Press, 2003. Assesses the Hague Summit within the broader canvas of growing European economic and political union.
  • citation-type="booksimple"

    xlink:type="simple">Hitchcock, William I. The Struggle for Europe. New York: Anchor Books, 2003. Lucid macro-level history of Europe after 1945. Ideal for grasping larger context in which the early forms of the EU developed.
  • citation-type="booksimple"

    xlink:type="simple">McNamara, Kathleen R. The Currency of Ideas: Monetary Politics in the European Union. Ithaca, N.Y.: Cornell University Press, 1997. Exclusive focus on the issue of monetary integration and neoliberal economic policies.
  • citation-type="booksimple"

    xlink:type="simple">Moravcsik, Andrew. The Choice for Europe: Social Purpose and State Power from Messina to Maastricht. Ithaca, N.Y.: Cornell University Press, 1998. Interpretive reworking of the EU and its antecedents. Downplays the significance of The Hague Summit.
  • citation-type="booksimple"

    xlink:type="simple">Pinder, John. The European Union: A Very Short Introduction. New York: Oxford University Press, 2001. Abbreviated in terms of EU’s historical context and development, but strong on detailing its functioning. Useful charts, graphs, data figures.

Bretton Woods Agreement Encourages Free Trade

General Agreement on Tariffs and Trade Is Signed

Benelux Customs Union Enters into Force

Value-Added Taxes Begin in Europe

European Common Market Is Established

French Students and Workers Rebel Against the Political Order

De Gaulle Steps Down

Brandt Meets Stoph

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