EMU and France

This article examines the loss of sovereignty that the transition to the Union implies for France in Economic and Monetary Union. In the first part, it reviews several episodes of French monetary history, and illustrates the constraints that today limit the margin of manoeuvre of France in terms of economic policy. France retains only a very limited and purely formal margin of manoeuvre, both in terms of monetary policy and the use of the exchange rate. A second section examines the interactions between different exchange rate regimes - flexible rates, stable but adjustable rates, fixed rates - and the markets for goods, labor and capital. The next section examines adjustment within an Economic and Monetary Union. The article concludes with an examination of the options open to France in the nineties. It shows that a devaluation policy would be extremely costly, and that maintaining the option to devalue significantly reduces the room for manoeuvre of fiscal policy. To restore this margin of manouvre, France should, on the one hand, make the Bank of France independent and responsible for the stability of the value of the currency and, on the other hand, propose to Germany and other countries for a strong currency of the Community to set the exchange rate of their currencies definitively and without fluctuation, in order to further guarantee the financial stability required for the use of any instrument of economic policy. This solution would also have the advantage of accelerating the transition to EMU and showing the movement