"Werner Report, EMS and EMU: Problems and Prospects of European Monetary Cooperation"

This paper seeks to explain the variance between success and failure of attempts to achieve monetary cooperation and integration in Western Europe. In its first two sections the paper develops six assumptions about international monetary behavior of states and the conditions for monetary cooperation among them. The first section argues that it is the distribution of power - defined as the ability to reduce or externalize the costs of international interdependence - that drives the monetary behavior of states. This general motive of states produces incentives as well as constraints for cooperation in monetary politics. The second section of this paper argues that it is the leadership of a single state that explains the variance of success and failure in monetary cooperation. The discussion in this section is based on a revised version of hegemonic stability theories, which emphasizes the role of the leader in manipulating the structural constraints incentives that states face in the issue area of monetary politics. It also stresses price stability as well as balance of payments position as power tools in the hands of the leader. Sections 3-5 analyze and compare the outcomes of three attempts at European monetary cooperation since 1970: the Werner Report (which remained unsuccessful), the EMS (which is widely viewed as a success of monetary cooperation) and the design for EMU in the Maastricht Treaty. These case studies trace the explanatory factors that can account for the variance in outcomes to the six assumptions that were developed in the conceptual sections of the paper. Overall, the paper concludes that a realist theory of the international political economy provides the necessary analytical tools to understand the patterns of international monetary policy