"Monetary power, bargaining asymmetries and the structural logic of EU exchange rate cooperation"

The first section of this paper defines the terms "weak" and "strong" currency countries and analyzes the balance of payments positions of the EU member countries. It emphasizes Germany's role as the primary strong currency country in the EU and explains the broad coalition patterns that evolved over time among strong and weak currency countries in European monetary politics. The second section explains the logic of macroeconomic adjustment for weak and strong currency countries. Because they do not face a reserve constraint, strong currency countries have much greater freedom to choose their preferred adjustment option than weak currency countries. Section three explains how much this asymmetry in adjustment options shapes the logic of bargaining over rules of monetary cooperation. Strong currency countries are often in a superior bargaining position and, therefore, tend to yield stronger leverage over bargaining outcomes.