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1 Introduction Multilevel Governance, History, and Monetary Cooperation Since the Werner Plan a dozen years ago and since the days of the snake, since the founding of the EMS in particular, different bodies and groups have done enormous preparatory work for further monetary cooperation. This work resembles a hidden treasure: all the papers are written by monetary experts and for the use of monetary experts; they therefore hardly ever have reached the attention of the leaders or heads of state or government; in most cases they have not even been given full attention and full reading by finance ministers. —Helmut Schmidt The creation of the European Monetary System (EMS) is traditionally considered one of the landmarks of postwar Western European history. Many textbooks stress that it was an example of how European elites coped with global economic change.The advent of floating exchange rates,following the collapse of the Bretton Woods system in the early 1970s, was harmful for Western European economies,and the EMS constituted a European response.The EMS represented, indeed, the first serious attempt at reintroducing a semifixed exchange rate system on a European basis. And most important, that European response would have a strong influence on the economic and social policies of many participating European countries from 1979 onward. The EMS would be an external constraint —lauded or criticized—for the domestic economic policy choices of many European governments. Further adding to the importance of the EMS, countless European policymakers would present it as the first necessary step on the road to economic and monetary union (EMU). The European Currency Unit (ECU), the argument goes, was the forerunner of the euro. Though both of these assertions are certainly debatable, they do hint at one of Western Europe’s perennial problems: the need to stabilize monetary relations in a geographical zone where internal trade is intense. From the nineteenth-century Latin Monetary Union to the present-day euro, organizing currency fluctuations within Europe has remained a central issue for European policymakers. 2 INTRODUCTION But the EMS was more than just an exchange rate system. The inception of the EMS was part of a wider trend toward the tentative affirmation of the European Economic Community (EEC) as an international actor amid the profound economic , political, institutional, and social transformations of the 1970s. The EEC, created in 1957, had specific competences, multiple levels of governance, and a record of diverse successes and failures. But in the course of the 1960s and ’70s, it witnessed a steady enlargement of its sphere of influence. The EEC became a major international trade actor, set up diplomatic relations, and concluded a trade agreement with the People’s Republic of China; the European Political Cooperation (EPC) process, created in 1970, attempted to give a single voice to the EEC in foreign policy, with many failures but one important success at the Conference on Security and Cooperation in Europe (CSCE) in 1975.1 The emergence of the European Council, created in 1974, was itself a clear attempt to provide some form of European leadership.2 In addition to the European Council , the EEC’s complex political system was further developed with the first direct elections to the European Parliament in 1979.3 Nonstate actors increasingly tried to lobby the EEC to support new policies or reform older ones, thereby showing that the EEC increasingly mattered in terms of public policy choices.4 The successive enlargements (with the addition of Britain, Denmark, and Ireland in 1973; Greece in 1981; Portugal and Spain in 1986) further increased the size and importance of the EEC as a regional bloc.5 And finally, a new generation of policymakers had progressively replaced those who had first created the new institutions of Western European cooperation after the Second World War, showing that the EEC was something more than just a short-lived experiment. If the story of European monetary cooperation in the 1970s was, in many ways, the story of a regional attempt to provide an answer to global problems, there were also other solutions. Social, regional, industrial, and development policies, and the institutionalization of summitry (the G7 and European Council), to name but a few, were part of a response to the dramatic challenges posed by the collapse of the Bretton Woods system, the oil shock, the global recession/stagflation, the Third World and emerging countries, and the ongoing cold war.6 However imperfect and limited it was, the EEC of the 1970s was an affirmed polity, with a life...

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