This second answer depends on the first. Prosperity is likely to accelerate integration; economic failure may lead to political disintegration.
A few months after the birth of the EMU I took a trip through Euroland to examine these questions in depth. The answers lie in the history, the economics, and the politics of the nascent confederation.
THE union's economic roots lie in the stagflation of the 1970s. Through the 1960s the central economic objective in Europe, as in the United States, had been full employment. "Keynesian" economic policy was the prescribed instrument: rapid growth, leading to high employment, was to be achieved by keeping interest rates down to encourage business investment and by deficit financing when necessary to fill gaps in private demand. If inflation threatened, interest rates could be raised and budget surpluses substituted for deficits.
The oil-price spiral that began with the Yom Kippur War, in 1973, ended that policy. Burdened by unprecedented energy costs, Western economies could not hold either unemployment or inflation at a satisfactory level. As a result, by the early 1980s the electorates of Britain, Germany, France, and the United States all sought change. Except in France, where the socialist François Mitterrand ousted the rightist Valéry Giscard d'Estaing, left-leaning governments were replaced by the right; the Thatcher-Kohl-Reagan era began. The new rightist finance ministries, aided by their conservative central banks, determined to beat inflation down even at the cost of keeping unemployment high. France under Mitterrand tried the opposite tack but was pulled into line by its European competitors. Average annual inflation in the United Kingdom, Germany, and France fell by about two thirds from the period 1974-1983 to 1984-1991; unemployment increased by anywhere from a third to more than two thirds.
This was the background for the 1991 Maastricht Treaty, which created the EMU. To join the union, applicants were required to "converge" by this year on four criteria: low inflation, a narrow range of interest rates, stable exchange rates, and budget deficits no greater than three percent of GDP. Growth and employment were mentioned only in passing.
The revolution that had swept Eastern Europe two years before, culminating in the reunification of Germany and the end of the Soviet Union, was ignored. Reunification slowed growth in most of Europe, because when Chancellor Helmut Kohl's government incurred large budget deficits to pay for the reconstruction of East Germany, the Bundesbank contained the consequent inflationary pressure by raising interest rates. The depressing effects of the high rates spread across the Continent. Throughout this decade inflation has continued on a downward path, but unemployment has increased even further, rising above 10 percent in France and, somewhat later, in Germany. The UK, having opted out of the EMU, has followed its own policies, which have enabled it to reduce unemployment.