U.S. policy in the euro crisis and the institutional deepening of the monetary union

ABSTRACT

Theoretical approaches to European integration often downplay and sometimes ignore the role of external actors.  But the regime complex through which the euro crisis of 2010-2015 was prosecuted involved the United states directly and indirectly through the IMF.  Tracing such external involvement shows that, although they preferred greater deepening of euro area institutions than was achieved, U.S. and IMF officials nonetheless contributed substantially to the creation of the EFSF/ESM, robust ECB action and launch of the banking union project.  The conclusion formulates falsifiable expectations on which a theory of external influence in regional integration can be developed and tested.

KEYWORDS:

• U.S. policy
• euro crisis
• integration theory
• International Monetary Fund
• European institutions

Disclosure statement

No potential conflict of interest was reported by the author.

Supplementary material

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Notes

1. Leading contributions include Lundestad (2005); Heller and Gillingham (1996); Larres (2009); Dinan (2004); and Eichengreen (2008).

2. Studies of European integration that grapple with institutional overlap and complexity at the regional level include Enderlein, Wälti, and Zürn (2010); Tömmel and Verdun (2009); and Fabbrini (2015). Jones, Menon, and Weatherill (2012) survey theoretical perspectives on European integration. As exceptions, Mutschick (2012) and Hodson (2014) treat external actors.

3. Process-tracing methods are developed in Beach and Pedersen (2013) and Bennett and Checkel (2015).

4. Studies of the political economy of the crisis overall include, Schelkle (2017), Brunnermeier, James, and Landau (2016), Caporaso and Rhodes (2016), Matthijs and Blyth (2014), McNamara (2014), and Heipertz and Verdun (2010).

5. The purpose of the Special Issue in which this article appears; see, D’Erman, Schure, and Verdun (2020).

6. For a discussion of the global effects, see Truman (2013, 45–6) and IMF (2012).

7. See, U.S. Treasury, “Semiannual Reports on International Economic and Exchange Rate Policies,” at https://www.treasury.gov/resource-center/international/exchange-rate-policies/Pages/index.aspx. (Accessed 10 January 2018).

8. Danzman, Kindred Winecoff, and Oatley (2017), Oatley et al. (2013), and Helleiner (2014).

9. See, for example, Sheets, Truman, and Lowery (2018) and Kamin (2011).

10. See, also, Prasad (2013, 201–7) and Brookings Institution (2012).

11. See, Federal Reserve Bank of New York, “U.S. Dollar Liquidity Swap Operations,” at <http://www.newyorkfed.org/markets/fxswap/fxswap_recent.cfm> [16 January 2018].

12. See, Bernanke (2015), especially, 474–80, 505–9, 524–6.

13. U.S. Treasury, “Calendars of the Treasury Secretary,” at https://www.treasury.gov/FOIA/Pages/calendars.aspx. [Accessed 10 January 2018].

14. “Remarks by President Obama at Stavros Niarchos Foundation Cultural Center in Athens, Greece,” The White House, Office of the Press Secretary, 16 November 2016, at https://obamawhitehouse.archives.gov/the-press-office/2016/11/16/remarks-president-obama-stavros-niarchos-foundation-cultural-center. (Accessed 13 January 2018).

15. Thacker (1999), Oatley and Yackee (2004), and Copelovitch (2010), among others, demonstrate the influence of the United States on IMF policies and programs generally.

16. Interview with a former administration official, Washington, D.C., 19 July 2013.

17. Interviews with an official and former official of the U.S. Treasury, Washington, D.C., 9 January and 6 September 2013, and 13 October 2014. Fed Chairman Bernanke agreed with this position and the U.S. posture was aligned with Trichet’s ECB. See, Bernanke 2015, 507).

18. Interviews with a U.S. Treasury official and former official, Washington, D.C., 18 March, 9 January 2011, 6 September 2013, and 18 June 2014.

19. French President Sarkozy argued vociferously against including the Fund precisely on the grounds that it would give the United States influence over the euro area. See, Bastasin (2015, 153–54).

20. Blustein (2016, 133–46) and IEO (2016).

21. See, for example Henning (2009).

22. See, for example, Weiss (2014). In the event, Congress delayed approval of the 2010 quota increase and reforms for five years.

23. On the Irish case, see Joint Committee of Inquiry into the Banking Crisis (2015); Donovan and Murphy (2014, 247).

24. Pisani-Ferry, Sapir, and Wolff (2013) and Bastasin (2015).

25. See, Jones (2012); Bastasin (2015); Brunnermeier, James, and Landau (2016); and Henning (2017, 131–47). See, also, Lagarde (2012).

26. Interviews with U.S. Treasury officials, Washington, D.C., 18 March 2011, and 24 January, 12 and 21 March, 2012.

27. Geithner (2014, 473–4). See, also, Bastasin (2015, 317).

28. The Spanish government also wanted to avoid financing from the IMF, but would have not been able to avoid a full program absent progress on banking union and the ECB’s OMT announcement. See, Henning (2017, 131–47, 237–38).

29. Interviews with officials and a former official of the U.S. Treasury, Washington, D.C., 24 January, 9 January 2012 and 6 September 2013, and 13 October 2014.

30. Interviews, Berlin, 10 December 2012, and Paris, 7 June 2018. On the Merkel-Obama relationship, see, also, Kornelius (2013, 126–36).

31. Interviews with an Italian Treasury official, Rome, 15 May 2015, and a former French Elysée official, Paris, 8 July 2015. See, also, Wieser (2018).

32. See, among others, Varoufakis (2017), Henning (2017, 184–232), and Sokou (2018), as well as Moschella (2016).

33. Interviews with former State Department and White House officials, Washington, D.C., 8 February and 11 October 2017, and 10 January 2018.

34. Brunnermeier, James, and Landau (2016, 265–67); Sokou (2018).

35. German Bundestag, Plenary Transcript, Stenographic Report, 118^th Session, Berlin, Wednesday, 19 August 2015.

36. Interviews with former officials, Washington, D.C., 11 October and 20 March 2017.

37. See, for example, Regling (2017) and his remarks reported in Reuters (2015).

38. See, for example, European Commission (2017) and Benassy-Quéré et al. (2018).

39. On the latter, see, for example, the IMF’s annual Concluding Statements on euro area surveillance missions at <www.imf.org>.