Well, all right then. The Maastricht treaty successfully imposed monetary and fiscal discipline and achieved convergence in several areas. It gave the central banks political cover for squeezing out inflation. But no good deed goes unpunished. Labor market rigidities raised the cost of disinflation in terms of unemployment, and one could not help but notice that most of the governments that began the romance were not around for the wedding.
Attention now turns to the marriage.
Although the transition to monetary union succeeded in many important respects, the U.S. and British experience during the same period confirmed some of the advantages of exchange rate flexibility. The reduction in inflation was almost as good, while unemployment rates went down rather than up. Unemployment and inflation moved in opposite directions in Europe, while they both declined in the United States and Britain. Granted, this probably had more to do with labor market flexibility than with exchange rate flexibility. Ironically, European workers became the victims of policies designed to protect them and a reluctance to let the labor-market churn work.