Does EMU Make Sense for Europe?

There is virtually unanimous agreement that trade integration within the European Union is to everyone's advantage. No such unanimity exists however over the net benefits, or the distribution of benefits, likely to flow from monetary union. Intense debate continues, both at the theoretical and at the empirical level, over the issue of a single currency for Europe. Advocates of EMU who focus on the political rather than the economic aspects argue that too much political capital has been invested in EMU already for the project to be postponed or abandoned. Those of the opposite persuasion focus on the tensions that will inevitably arise in the operation of the single curency; these tensions, they suggest, will use up political energy that could otherwise be devoted to the expansion of the EU, the benefits of which are not in doubt. The present paper reviews this debate.