Political Aspects of European Monetary Integration After World War II

I. After World War II, an all-encompassing effort was undertaken to eliminate for the future the risk of war between European countries which twice in this century had spread to the whole world. From the beginning, also economic cooperation arid monetary integration were politically motivated--by tying the European countries together in a common institutional framework and by rebuilding their economies in a mutual coordinated effort. The objective was to avert large-scale social misery, in the past a fertile breeding ground for' nationalistic and antagonistic feelings and policies. As the Cold War started to unfold, another important reason was to strengthen resistance to communism in Western Europe. Yet, the history of European economic cooperation and monetary integration is most frequently described and analayzed in economic terms. The expansion of foreign trade and the removal of custom barriers, the elimination of payment restrictions and the granting of credit lines lend themselves more easily to description and analysis in quantitative terms. Improved political cooperation and stability and the overcoming of political rivalry eludes precise analysis. Policies to rebuild the war-shattered economies of Europe concentrated on the onehand on the creation of a world-wide economic order by establishing the International Monetary Fund (IMF), the General Agreement on Tariffs and Trade(GATT), as a stand-in for the never realized International Trade Organization, and the International Bank for Reconstruction and Development . (the World Bank) which initially was mainly intended to assist in the rebuilding of the European economies. On the other hand, the US-financed European Recovery Program (ERP), the Marshall Plan, was to give a strong initial boost to European countries, thus providing a basis for the liberalization of trade and the multilateralization of payments within Europe in the framework of the Organization for European Economic Cooperation (OEEC; established in 1947) and the European Payments Union (EPU; established in 1950). The policies pursued by these institutions were successful beyond reasonable expectations, and it can be stated with confidence that without their success, one could not have seriously thought of creating the European Economic Community (EEC).(1) The OEEC also promoted greatly political cooperation among its member countriesand strengthened the awareness of mutual interdependence. That the creation of OEEC and EPU was in large part motivated by the political objective of promoting cooperation among former enemies in rebuilding their economies was exemplified by the inclusion of the western parts of Germany in the work of the ERP and the OEEC even before the founding of the Federal Republic of Germany in 1949. This was in striking contrast to the policies ofvictorious countries alter World War I. At the same time, the refusal of the Soviet Union (and itssatellites) to participate in the ERP and to join the OEEC as well as its decision not to join the IMF and World Bank foreshadowed the Cold War al an early stage. It also barred East Germany, the future German Democratic Republic, from the unfolding effort to overcome the consequences of the war. This development greatly contributed to the disparate evolution of the economies and societies in the two parts of Germany, a fact which came to the open with the social, economic and financial difficulties associated with German unification in 1990.