European Monetary Integration and a Position of its Former Hegemon

There is no historical precedent for the institutional set-up of the eurozone. However, it is an arrangement that could not and cannot escape the universal laws and principles of economics. This paper tries to look generally at the consequences of this integration project from the perspective of the former monetary hegemon, Germany, whose hegemony largely ended as a result of the monetary integration method chosen. Those consequences are of course more apparent in bad times than they were in good times. We then specifi cally examine the problem of convergence and divergence within a currency area and discuss the issue of competitive devaluation. In the conclusion we try to formulate the fundamental dilemma faced by the former monetary hegemon. Its solution will affect those inside and outside the integration project.