Challenges for International Economic Policy Coordination in EMU

Institutional Setting, Financial Market Reactions and the Importance of Systemic Risk
  • Martine Durand


The euro area is unique in the sense that it consists of eleven sovereign states with a single currency. Economic policy making powers at the euro-area level differ significantly from those in fully-fledged federations. In particular, while fiscal policy is formulated in the context of the Stability and Growth Pact, virtually all fiscal competencies remain at the national level according to the principle of subsidiarity. By contrast, the European Central Bank (ECB) sets monetary policy for the area as a whole. This new framework raises the issue of co-ordination of policies at the euroarea level. It also raises issues regarding the future relations of the Economic Monetary Union (EMU) with countries outside the area. In this respect, this paper addresses the following two questions:
  • What are the risks that the new institutional arrangements put in place in the euro area may generate more unbalanced policies — or make it more difficult to conduct stabilisation policies — than earlier, creating negative international spillovers?

  • And related to this, does the new framework imply systemic risks for the functioning of international financial markets?


Monetary Policy Fiscal Policy Euro Area European Central Bank Banking Supervision 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer Science+Business Media Dordrecht 2001

Authors and Affiliations

  • Martine Durand
    • 1
  1. 1.Economics DepartmentOrganisation for Economic and Co-operation Development (OECD)Paris Cedex 16France

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