A choice for European monetary integration: politics of exchange rates between EMS and EMU

The politics of growth models literature posits that political economies pursue policies tailored to the interests of the economic sectors underpinning their respective growth models, thereby predominantly reflecting producers’ group preferences. From this perspective, preferences over macroeconomic policies, such as exchange rate regimes, are expected to converge among growth models with similar structural features and to diverge across distinct ones. Yet, differentiation in European monetary integration has occurred within rather than between similar growth models. While export-led Germany embraced the euro, export-led Denmark opted to remain outside the common currency. Conversely, although domestic consumption-led growth models ostensibly benefit from greater monetary autonomy, Italy nonetheless acceded to the euro and emerged as one of its most ardent advocates. This article contends that the prevailing theoretical framework is insufficient to account for these divergent preferences for (quasi-)fixed exchange rate arrangements at the European level. It advances an alternative approach that supplements the politics of growth models framework with a historical-materialist policy analysis inspired by regulation theory extended by neo-Gramscian insights and Poulantzas’s theory of the state. The article subsequently employs this approach to analyze the historical-materialist context, actor constellations, and processes shaping policy formation regarding the European Monetary Systems and European Monetary Union in Germany, Denmark, and Italy.