Germany and the Politics of EMU

Of all the members of the European Union (EU), Germany had the strongest interest in the pre-Maastricht status quo. Not only did the Federal Republic’s monetary arrangements facilitate low levels of inflation, but its participation in the Exchange Rate Mechanism (ERM) of the European Monetary System (EMS) enabled Germany to enjoy monetary policy autonomy within a zone of relatively stable exchange rates. Replacing a system in which the deutschmark was the anchor currency and Germany the hegemonic power with a system where Germany had an equal vote with Portugal and Belgium was not readily explicable in either domestic political or economic terms. It was thus rather surprising that Germany’s political leaders agreed to and championed European-level monetary arrangements. The geopolitical considerations surrounding German unification dictated a reaffirmation of Helmut Kohl’s government’s commitment to European integration in, among other things, an agreement on Economic and Monetary Union.1 At the same time, Germany’s diplomats laboured under a series of domestic political constraints — electoral, coalitional, and institutional. The broad extent of these restrictions strengthened the position of German negotiators at Maastricht and led to an agreement whose parameters closely mapped German preferences.2