In 2009 the euro entered a crisis from which it has yet to emerge. It has led to increased social tensions across the Eurozone and even speculation that the euro might break up. Against this background this paper sets out to re-examine the Hard ECU, the British government's 1990 alternative to the Delors plan for monetary union which was adopted at Maastricht in 1992 and led to the euro. Unlike previous scholarship on the Hard ECU this paper is now in a position to compare the scheme to the euro as it actually functions, not to some hypothetical. This paper examines the original documents behind the euro and the Hard ECU from sources in Britain and on the continent. It applies new concepts of political economy, specifically the 'monetary policy trilemma' and 'political trilemma', to compare the two schemes. We find that existing explanations of the rejection of the Hard ECU, focusing on point of origin or lack of 'flexibility', fail to understand either the state of European monetary debate in the period 1987-1992 or the essential nature of the Hard ECU scheme itself. We find that economic critiques of the scheme on the grounds that it would not lead to a single currency are probably sound but actually count favourably for the Hard ECU. Finally, we conclude that the Hard ECU would have left greater scope for democratic politics than the euro.

The European Community is negotiating a new treaty to establish the constitutional foundations of an economic and monetary union in the course of the 1990s. This study provides the only comprehensive guide to the economic implications of economic and monetary union. The work of an economist inside the Commission of the European Community, it reflects the considerations influencing the design of the union. The study creates a unique bridge between the insights of modern economic analysis and the work of the policy makers preparing for economic and monetary union.