Adjusting to EMU

Abstract:

This book is one of the series ‘One Europe or Several’, which examines contemporary processes of political, security, economic, social and cultural change across the European continent, as well as issues of convergence/divergence and prospects for integration and fragmentation. The work explores the effect of Economic Monetary Union (EMU) on economic governance in the EU and in several key Member States within and outside the Euro area.

The book is organised in three parts. The first deals with the legal and constitutional framework and examines the conceptual model underpinning the macroeconomics of EMU. Chapter two covers the challenges to macroeconomic policy in EMU arising from diversity between states and the disproportionate responses to inflation and deflation bringing pressure to bear on the Stability and Growth Pact. Chapter three examines the institutional framework of EMU and the important feature of interdependence apparent in the push and pull of uniform and centralised monetary policy and the decentralised fiscal policy. This latter aspect is explored further in chapter four, which acknowledges that a common fiscal policy is unrealistic - and probably undesirable - and that the way forward will be through co-ordination. Chapter five explores structural policy co-ordination and the reasons for co-ordination of employment and labour market policies in the Member States.

The second part is focussed upon the empirical analysis of the adjustment to EMU. It opens with a chapter presenting an overview of empirical developments in Stage 2 and Stage 3 and the misplaced assumptions that France and Germany, the Benelux countries, Austria and perhaps Ireland would be best placed to benefit. Chapter seven takes a detailed look at the German economy, in particular its problems in the labour market. The eighth chapter looks at the Irish phenomenon and its rampant growth and success. Chapter nine examines the Finnish experience and comments upon the adjustments made on entering Stage 3 to become compatible with a successful economy. This contrasts with Sweden which has chosen a slow route to EMU and expressed reluctance to enter Stage 3, as explored in chapter ten. The most cautious attitude towards the euro is displayed by the UK, and this is discussed in chapter eleven. Chapter twelve explores the potential for new members with particular focus on Estonia and its currency board which has been in place since 1992. Chapter thirteen, being the third and final part, draws from earlier chapters to present conclusions and to examine some policy issues surrounding the Stability and Growth Pact and the necessary but varied adjustments to EMU.

The book will interest scholars, students and policy researchers and policy makers engaged in EMU studies, European integration and European economics.