Cooperation and asymmetric interdependence: The Bundesbank, currency markets and the European quest for mutual accommodation, 1959--1999

The puzzle. For the last decade, the political economy literature on Germany's role in the history of European monetary unification focused on the Bundesbank's ascent to the “Bank that ruled Europe” and asked how Germany's central bank had managed to leave its mark on the continent. However, with the inception of the Euro and its immediate internal and external softening, it became quickly evident that EMU hardly carries the mark of the Bundesbank but represents a German concession to France and Italy. The implicit puzzle is whether we can reconcile the key role played by the Bundesbank in European monetary integration with the fact that the outcome was above all a German concession. This dissertation puts forward an answer.; The argument. This dissertation contends that the governments of Europe moved to EMU because Bundesbank independence became incompatible with their quest for mutual adjustment and accommodation. Indeed, as long as the Bundesbank was independent, it had the structural capacity to resist adjustment and to foreclose Options for cooperation that were incompatible with its domestic preferences. This structural power was the basis of the Bundesbank's ability to assert far-reaching influence over the historical course of monetary integration. Though Bundesbank policies contributed to a generally desirable process of European disinflation, the French and Italian governments evaluated the Bundesbank's unwillingness to agree to more symmetrical adjustment procedures as unacceptable—particularly after they had deflated. Over the issue of reunification, the German government conceded EMU to accommodate French and Italian grievances with an independent Bundesbank and thus delivered the adjustment they sought. The process of European adjustment became mutual at the point where Maastricht was fully implemented and the Bundesbank was retired in 1999. The case of European monetary integration, I argue, supports theories that understand cooperation as resulting from a mutual willingness of states to accommodate each other and from a mutual convergence of state preferences.; The method. This dissertation uses the comparative case method to analyze policy choices in Germany, France and Italy.