Description
How did the offshore Eurodollar markets affect European integration? Scholars use the framing of a European fortress to reflect upon the degree of autonomy of a sovereign Europe vis-à-vis hegemonic USD flows. From this perspective, European financial integration projects, including the euro, are framed as responses to shield against destabilising USD flows since the fall of Bretton Woods. I challenge these accounts by showing how the European commission pro-actively tried to build a European common financial market in the 1960s. This, however, failed because of the large European universal banks’ interlocking balance sheets on the Eurodollar markets. Tracing the largest banks’ USD practices through the 1960s-1980s, I argue that competitive pressures of the Eurodollar markets critically shaped the European and City banks’ interest in and influence over European financial integration. At first, they rejected the European Commission’s 1960s initiatives for a common financial market because national boundaries protected their own home markets. Simultaneously, the EEC’s anti-competitive regulations threatened to restrict bank operations in Eurodollar markets because banks operated via lending clubs, essentially trans-European cartels. Eurodollar banks’ interest in a European common capital market only arose in the late 1970s after competitive pressures in USD markets necessitated different tactics of credit creation and the EEC’s threat to their strategies abated. But by then, European finance was already deeply dependent on USD markets. As European banks became important architects of USD flows, any monetary project aiming to create an ‘independent’ Europe was doomed from the start.
