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Remapping EMU. On the Future Construction of Economic and Monetary Union. WWWforEurope Policy Paper No. 5

Author

Listed:
  • Stefan Ederer
  • Stefan Weingärtner

    (WIFO)

Abstract
The economic crisis has laid open deficiencies in the construction of the European Economic and Monetary Union. At its foundation, it was assumed that monetary integration would reduce the likelihood of asymmetric shocks. The crisis shows, however, that endogenous mechanisms may even amplify existing asymmetries. Without a lender of last resort, a common regulation and supervision of banks, a common fiscal policy and a co-ordinated economic policy the European Monetary Union is incomplete. The European Council and the Commission have proposed reforms for the completion of Economic and Monetary Union. Among these proposals are the implementation of a Banking Union and an integrated economic and fiscal policy. In the long run, national government debt is to be mutualised at the European level. A European fiscal capacity shall be combined with an automatic transfer mechanism between member countries, in order to smooth business cycle differentials. Further proposals are intended to accelerate in future structural reforms by the member countries along the lines of the country-specific recommendations issued by the Commission and the Council. A first step towards creating an integrated Banking Union has been taken by the introduction, albeit in an attenuated version, of a common bank supervision. However, key elements to secure the stability of the euro area are still missing. Measures recently decided under the acute pressure of the crisis ("Six-pack", "Twopack", "Fiscal compact", "Euro-plus Pact") are confined to structural reform and have de-facto suspended the operation of automatic stabilisers in the crisis countries. This severely undermines popular support in debtor and creditor countries alike for Economic and Monetary Union, to the point of jeopardising its existence.

Suggested Citation

  • Stefan Ederer & Stefan Weingärtner, 2013. "Remapping EMU. On the Future Construction of Economic and Monetary Union. WWWforEurope Policy Paper No. 5," WIFO Studies, WIFO, number 47009, March.
    • Handle: RePEc:wfo:wstudy:47009
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    File URL: https://www.wifo.ac.at/wwa/pubid/47009
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    References listed on IDEAS

    as
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    8. Stefan Ederer, 2012. "European Monetary Union in Crisis," Austrian Economic Quarterly, WIFO, vol. 17(2), pages 81-94, May.
    9. Handler, Heinz, 2013. "The eurozone: piecemeal approach to an optimum currency area," MPRA Paper 67183, University Library of Munich, Germany.
    10. Karl Aiginger & Stefan Ederer & Olaf Cramme & Roger Liddle & Renaud Thillaye, 2012. "Reconciling the Short and the Long Run: Governance Reforms to Solve the Crisis and Beyond. WWWforEurope Policy Brief No. 1," WIFO Studies, WIFO, number 46058.
    11. Stefan Ederer & Jürgen Janger, 2011. "Promotion of Growth and Employment in Austria within the New European Policy Framework," Austrian Economic Quarterly, WIFO, vol. 16(2), pages 119-131, July.
    12. Stefan Ederer, 2010. "Imbalances in the Euro Area," Austrian Economic Quarterly, WIFO, vol. 15(3), pages 277-290, October.
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