Rising Imbalances and Diverging Monetary Power in the Eurozone

The previous chapter has argued that the global monetary system remains largely centered around the dollar and the United States, which has played the role of consumer-of-last-resort over the past two decades by pursuing finance-led growth. In this chapter I focus on the international monetary power of the Eurozone member states, which will allow me to explain why the Eurozone has not functioned as an engine of global demand since the introduction of the euro. One of the principle motivations behind the introduction of the euro was to strengthen the monetary power of its member states. As a patrician currency whose action radius would spawn a region that almost matches the United States in terms of GDP, the euro was meant to strengthen the macroeconomic autonomy of its member states by decreasing their vulnerability to external monetary developments. Given the laudability of the motivation behind its creation, it is very surprising that systematic examinations of the impact of the EMU on the monetary power of its member states are in short supply in the IPE literature. For those IPE scholars that have paid attention to this issue, the prevailing understanding seems to be that EMU member states have more or less equally benefited from the creation of the euro in terms of monetary power. This understanding is based on the notion that the EMU regime is a symmetric system of European monetary cooperation entailing two empowering mechanisms that would support the macroeconomic autonomy of its member states to an equal degree.