Economic adjustments within the European Economic Community

Abstract

The European Economic Community seeks to combine a clearly defined, completely integrated economic union with a rather vaguely defined political union. How well such a combination can succeed remains to be seen. The present article considers the crucial, yet little discussed issue of whether full economic union itself requires a federal state with great political autonomy, or rather economic union can exist with member states retaining significant elements of political and economic autonomy. The author examines the extent to which full economic union of the sort envisaged in the EEC leaves scope for domestic autonomy in each member nation. The ability of a member nation to pursue internal and external balance through the use of policy instruments remaining under its control is also examined. The author argues that internal and external balance is already difficult and thus should not be made more so for members of the EEC.

JEL: F15