Connecting Monetary Union and Political Development

The conventional wisdom used to be that a single currency would promote political integration.  As Jacques Rueff once quipped: ‘Europe will be made by money or it will not be made at all.’  Now the opposite seems to be more likely.  Far from bringing Europe together politically, the single currency appears to have pulled it apart.  The argument in this paper is that both extremes are misguided.  Money and politics are closely related, but not in the developmental sense.  Distributive politics and identity-based mobilization are more important than monetary integration.  And the choices that shape the monetary union to existing distributive coalitions – rather than any absolute requirements for a single currency per se – are what will ultimately pull a union together or push it apart.