Power and Currency: Did the Euro Improve the French State’s Monetary Power?

Abstract This study has sought to assess the evolution of the French state’s monetary power in comparison with Germany and the United States since the introduction of the euro. From a macroeconomic aspect, monetary power acts through the balance of payments. A set of characteristics improve (or reduce) the power to delay and deflect the adjustment of the balance of payments: financial variables, sensitivity and vulnerability of an economy, and international role of a country’s currency. From that perspective, we analyzed the impact of a monetary union in the case of France and came to three conclusions. First, the international role of the euro increased the French state’s power to delay, but also the power to deflect, relative to the United States. Second, the German government decided the rules of the game inside the monetary union based on the ordoliberal philosophy. Third, the economic structure of the German economy provided an advantage in comparison with France, which led to a change of France’s status. As a result, the French state has lost its capacity to implement its own macroeconomic policies, become monetary dependent relative to Germany and, consequently, has lost its monetary power.