Why should Europe opt for monetary union? ‘One Market needs one Money’! This is, at first sight, the key argument of the influential report by the European Commission entitled “One Market, One Money”, published in 1990. But after closer examination of the report, Daniel Gros considers its rather more agnostic subtitle: “An evaluation of the potential benefits and costs of forming an economic and monetary union” and concludes that the key argument was in fact the other way round: one money would create one market. Unfortunately, the authors of 1990 did not recognise that ‘one money’ would foster huge cross-border financial flows that would one day lead to a very costly financial crisis.
Daniel Gros is Director of CEPS.