European monetary union: Alice in Wonderland or Malice in Blunderland?

There can be no question that Europe needs a common currency. A common currency reduces the costs of international transaction, avoids the risk of exchange rate fluctuations, and contributes to optimal allocation of resources in Europe. However, the overall economic effects, quantitatively considered, are only marginal. Really important is the political objective of demonstrating that Europe, which is at the same time an economic giant and a political dwarf, is able to marshal its forces and transfer national sovereignty to truly European institutions. Against this background, the European Monetary Union (EMU) serves as a symbol. It is an evident sign of the irreversibility of the process of integration, emphasizing the growing together of European nations to an economic and finally a political whole. The strategic choice is whether EMU is an instrument to transfer monetary policy competence to the European level or to keep it more or less a domain - however informal - of the German Bundesbank.