At the European Council meeting in Madrid in December 1995, member states of the European Union agreed on a timetable for organizing an economic and monetary union (EMU). A decision on membership of EMU will be made as early as possible in 1998, and EMU itself will start in January 1999. Final exchange rates between the currencies of participating members will be established and a new European currency, the Euro, will be introduced under the guidance of the European System of Central Banks. Three and a half years later, the Euro is supposed to become the sole currency of the monetary union.
The road toward a single currency is riddled with economic and political problems. One of the trickiest is the relationship between the countries able and willing to join EMU in January 1999, the so-called insiders, and those not joining, the outsiders. Observers agree that the EMU will not exist without a clear agreement on a link between the two groups of countries.
The debate on this link is intense and, at times, even passionate. Given the importance of EMU, the Editors decided to have a debate in the Review by leading European economists. Their articles are drawn from longer papers presented at a conference on "Monetary Coexistence" held in Rome in February 1996 and organized by Francesco Giavazzi and Luigi Spaventa. The articles are based on the likely scenario that the "insiders" will include Germany, France, Finland, Ireland, the Benelux countries, and Austria; whereas the "outsiders" will include the United Kingdom, Denmark, Spain, Portugal, Italy, Sweden, and Greece. Three of the contributions advocate a multilateral solution based on an exchange-rate mechanism, although they differ on the specifics of this solution. The fourth contribution puts forward a sharply different solution, arguing in favor of a generalized system of inflation targeting. The Editors hope that these four articles will spark additional debate on EMU in the pages of the Review.