Based on the conceptual framework of the ‘Money View’, this paper argues that European monetary integration until the Eurocrisis only focused on harmonizing public money on a supranational level while neglecting private credit money creation. The privately issued credit money supply in the European Monetary Union (EMU) is made up of both bank deposits and ‘shadow money’ forms (e.g. money market fund shares and repurchase agreements). The paper discusses if the institutional evolution and the political reform projects after the crisis have led to an upload of the frameworks for private credit money creation on a European level. On the one hand, the paper takes into account the ECB’s role in compensating the unwillingness of European banks to continue intra-EMU cross-border lending by tolerating and supporting TARGET 2 balances. On the other the hand, it addresses the Banking Union reforms. The paper finds that with regard to bank deposits as ‘traditional’ private credit money, a spill-over is taking place that by and large leads to monetary integration further down the monetary hierarchy and seems to establish the public-private partnership for deposit creation on a European level. Finally, the paper defines an avenue for further research on the creation and regulation of shadow money in the EMU.
Presented at the 3rd Workshop in International Studies of the European International Studies Association (EISA), Tübingen (04/2016)