Outsiders often complain that discussions of EMU do not pay sufficient attention to the international environment in which EMU will operate and even less attention to the impact of EMU on other countries and the international monetary system.

The first omission is more serious for those who seek to understand how EMU will operate. The performance of the European economy will be affected by the exchange rates connecting the ECU with other major currencies, including the dollar and yen, and the policies of the ECB will influence those exchange rates. This issue is ignored by much of the academic literature, which typically studies the effects of a monetary union in a two-country setting closed to the outside world. The issue was raised by the Delors Report (1989), which stressed the need for the EC as a whole to adopt an appropriate policy mix, and it was discussed in Chapter 4, which criticized the fiscal provisions of the Maastricht Treaty for failing to deal adequately with the issue.

The second omission is easier to understand. Efforts to appraise the benefits and costs of EMU have concentrated on those benefits and costs that Europeans are most likely to experience, because Europeans will have to decide whether to move ahead with EMU and, if so, how rapidly. Nevertheless, EMU will have external benefits and costs that have to be appraised realistically. These have been discussed by the Commission (1990) and others, but some of their findings are questionable, especially those concerned with policy coordination in the Group of Seven (G-7).