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Convergence and Divergence in the European Monetary System: German Hegemony and French Economic Policy (1979-1983)

Vincent Duchaussoy, Floriane Galeazzi

The aim of this paper is to study the Franco-German political and economic relationship, from the creation of the European Monetary System (EMS) in February 1979 to the French decision to remain within the EMS and alter the course of French economic and monetary policy, in March 1983. Indeed, the creation of the EMS imposed to all its members a significant step towards economic convergence, whilst a second oil crisis was going to occur just a few months later. Moreover, the imperative of economic convergence will be questioned by Franccedil;ois Mitterrand's victory at the May 1981 presidential elections. Indeed Mitterrand intended to adopt a new economic policy, based on demand-side reflation and increased consumption. While the French independent policy was threatening the balance of the EMS, the German authorities tried to convince their French counterparts to alter the direction of French economic policy, even though they drew certain advantages from this policy which boosted German exports to France. We will particularly focus on the French and German relationships in the framework of the European institutions, such as the Monetary Committee or the Governors Committee in which, for instance, the Bundesbank had a dominant position.We will use archives from the Banque de France, the French Ministry of Finance, the European Commission and the Deutsche Bundesbank.

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