Economic thought at the European Commission and the creation of EMU (1957-1991)

To understand macroeconomic and monetary thought at the European Commission, two elements are crucial: firstly, the Rome Treaty, as it determined the mandate of the Commission and, secondly, the economic ideas in the different countries of the Community, as economic thought at the Commission was to a large extent a synthesis and compromise of the main schools of thought in the Community. The Rome Treaty transformed economic and legal rules in the countries of the Community. It comprised the creation of a common market, as well as several accompanying policies. Initially, economic thought at the Commission was to a large extent a synthesis of French and German ideas, with a certain predominance of French ideas. Later, Anglo-Saxon ideas would gain ground. At the beginning of the 1980s, the Commission?s analytical framework became basically medium-term oriented, with an important role for supply-side and structural elements and a more cautious approach towards discretionary stabilization policies. This facilitated the process of European integration, also in the monetary area, as the consensus on stability oriented policies was a crucial condition for EMU. Trough time, the Commission has taken seriously its role as guardian of the Treaties and initiator of Community policies, also in the monetary area. The Commission always advocated a strengthening of economic policy coordination and monetary cooperation. In this paper, we first focus on the different schools which have been shaping economic thought at the Commission. This is followed by an analysis of the Rome Treaty, especially the monetary dimension. Thereafter we go into the EMU process and the initiatives of the Commission to further European monetary integration. We will consider three broad periods: the early decades, the 1970s, and the Maastricht process.