The hidden face of the euro

Europe's economic and monetary union is often depicted as a market-conforming institutional order. The creation of an inflation-fighting independent European Central Bank and the obligation of member governments to maintain fiscal discipline are widely cited as evidence of the European desire to maintain stability and thus placate financial markets. But the euro also has a more hidden face, which is much less liberal and more decidedly managerial. The single currency is itself the boldest expression of a nascent federal power at the European level. It represents a far-reaching delegation of competence from the member states to the institutions of the European Union. It has also enabled member states not only to create a framework for multilateral fiscal discipline - the Stability and Growth Pact - but also to collectively regain some clout vis-à-vis market actors. The question for the future is whether EU and national policy-makers will be able and willing to pursue collective priorities beyond monetary stability and the rules of the Stability Pact.