When the first edition of this book was published in 2004, European integration was a process under way. During that year, ten countries joined the existing fifteen members of the European Union. Since then three more countries have gained membership. At that time, twelve countries had adopted the euro and seven have done so since then. As we close this edition, integration may sound like a misnomer as negotiations on the withdrawal of the UK are under way. In the mean time, the sovereign debt crisis has come close to triggering a disintegration of the Eurozone. In addition, in many countries, newly influential political parties present themselves as Eurosceptics, and some of them are in power. European integration currently seems more like a description of the existing situation than a continuing process, although seven countries have applied to become members of the European Union.

Still, excluding the UK, currently 447 million people live in the European Union, far more than in the USA. Everyday, they produce and consume goods and services that move freely within the continent and 340 million of them use the euro as their own currency. Furthermore, some 400 million people can travel seamlessly within the Schengen Area without having to show passports or identity cards. Thus Europe exists. It constitutes a unique historical achievement. After centuries of bitter wars, the continent is peaceful and deeply integrated, in spite of squabbles here and there. It is often said that Rome, its distant and very different predecessor, was not built in one day. Likewise, Europe is still being built.

This book describes and explains European integration, and its contents mirror the ever-changing situation. In the first three editions, we noted the many flaws in the integration process, especially those concerning the Eurozone. In the fourth edition, we were lamenting the policy responses to the crisis, pointing out what had to be done. At the time of the fifth edition, the crisis was coming to its end. Since then, much has been done, often along the lines that we mentioned. The European Union has been transformed, and so has this book. As always with previous editions, most of the tables, figures and boxes have been updated with the most recent data and events. The most drastic changes of this sixth edition concern both the pedagogy and the content. In terms of pedagogy, we have retained the five-part structure – see below – but:

• Chapter 1 discusses Brexit but since the manuscript had to be closed before the final ‘divorce’ deal was settled, the treatment was necessarily somewhat speculative.
• Chapter 8 offers an expanded treatment of migration, which has emerged as a major concern.
• Presentation of the macroeconomic theory in Chapter 13 has been streamlined, better motivated and extended. It now includes a new section that brings the main results together and presents the theory of exchange rate determination. The section on monetary neutrality has been moved in a succinct form to Chapter 15 where it is used to explain different views of monetary policy.
• Chapter 14 is now presented as a history of monetary integration in Europe, which makes full use of the principles developed in Chapter 13. It is designed as a transition between theory and applications developed in subsequent chapters.
• Chapter 15, which presents the optimum currency area (OCA), has been redesigned. It includes the aggregate demand and supply framework that has been requested by many instructors, while making more use of the theory presented in Chapter 13. It presents a thorough discussion of the insurance role of transfers.
• Chapter 17 has been extended to include new developments, including regarding the Stability and Growth Pact and the macroeconomic imbalances procedure.
• A new section has been introduced at the beginning of Chapter 18 to present the explain financial markets using the theory developed in Chapter 13. That theory is also used to explain risk and the variety of interest rates (maturities and riskiness).

Obviously, the latest developments are fully covered. The information is included in context within every chapter.

Preface (358.0K)