The new and prospective entrants to the EC join an economic environment that itself is undergoing rapid change. The combination of the European Monetary System (EMS) and the integration of European financial markets in 1992 will alter substantially the environment of monetary and fiscal policy...

The historical record suggests that economic development is associated with the rise of the financial sector. This rise is often triggered by exogenous events such as large budget deficits generated by wars or the availability of large investment projects such as railroads. This paper discusses...