Lucio R Pench, Stefan Ciobanu, Marcin Zogala, Cristiana Belu Manescu, 14 October 2019

Much of the debate on fiscal discipline and policy has focused on fiscal rules and their appropriate design. Using recent work by the European Commission on national fiscal frameworks in the EU member states, this column shows that other elements of the fiscal framework are just as important as national fiscal rules for fiscal discipline. Independent monitoring of compliance, more realistic macroeconomic and budgetary forecasts, comprehensive and timely fiscal statistics and medium-term fiscal planning are also key for fiscal discipline in the EU.

Philipp Hartmann, Glenn Schepens, 06 November 2019

On the occasion of the 20th anniversary of the euro, the experiences with EMU so far and crucial factors for its success going forward were at the core of ECB’s 2019 Sintra Forum on Central Banking. In this column two of the organisers highlight some of the main points from the discussions, including the diverse progress with economic convergence and how it may relate to the geographic agglomeration of industries, the role of fiscal policies relative to monetary policy for macroeconomic stabilisation in the still incomplete monetary union, and selected key determinants of future growth in the euro area. 

Nauro Campos, Fabrizio Coricelli, 08 July 2019

This year has seen the 20th anniversary of the euro, but so far we have not seen many articles that take stock of the accomplishments and disillusionments of the single currency, and of how to improve it. This column hopes to change this by picking and discussing 20 papers that economists and policymakers should read, or re-read, and reflect upon in this 20th anniversary year.

Marco Buti, Maya Jollès, Matteo Salto, 19 February 2019

The launch of the Economic and Monetary Union in 1999 was a considerable challenge and a historic milestone. The first decade of its existence firmly established the euro as a credible construction. As this column describes, however, from 2008 onwards the economic and financial crisis in Europe laid bare the weaknesses of its initial construct. Some assumptions behind the EMU institutional setting had to be reconsidered and, in the following years, considerable efforts were made to strengthen the EMU. To complete the job, we need to rebuild trust and overcome the creditors/debtors divide. 

Miguel Almunia, Pol Antràs, David Lopez Rodriguez, Eduardo Morales, 04 February 2019

The recommendation that firms reduce unit and labour costs to gain international competitiveness in response to domestic economic crises is based on the assumption that domestic and foreign supply decisions are not linked at the firm level. This column shows that in a monetary union, exports can have a significant impact in mitigating domestic slumps through the ‘venting-out’ mechanism. By reducing their use of flexible inputs relative to fixed, firms can achieve a short-term decrease in marginal costs to gain competitiveness abroad. This explains how an economic crisis and an export boom can take place at the same time.

Marco Buti, Nicolas Carnot, 07 December 2018

The debate continues over the needed ingredients for a stable Economic and Monetary Union. Some authors have argued that the completion of a financial union (banking union and capital markets union) together with sound national fiscal policies eliminate the need for common budgetary instruments. The authors of this column beg to disagree and re-state the case for a central fiscal capacity. In essence, whilst financial union and a euro area fiscal stabilisation are substitutes in normal times, they are complementary in bad times. 

Michel Heijdra, Tjalle Aarden, Jesper Hanson, Toep van Dijk, 30 November 2018

A central fiscal capacity is a recurring topic in discussions on reform of the Economic and Monetary Union, but no consensus on the usefulness and necessity of a such a capacity has been reached. This column, part of the Vox debate on euro area reform, argues that the potential stability benefits of a central fiscal capacity can be achieved through stronger financial market risk sharing and more effective use of fiscal stabilisers, without any additional fiscal risk sharing.

Bert Smid, Beau Soederhuizen, Rutger Teulings, 10 September 2018

The transition to a European banking union is not straightforward. A key issue is how to prioritise risk sharing and risk reduction. This column examines three possible approaches, describing the respective transition scenarios and analysing the consequences for banks during the transition phase. None of the scenarios is optimal for all countries, but waiting too long may lead to solutions needing to be found under the pressure of a new crisis.

Massimo Bordignon, Nicolò Gatti, Massimiliano Onorato, 27 July 2018

While it was obvious at the time of the introduction of the euro that the euro area did not satisfy the criteria for an optimal currency area, increased economic convergence was expected to make it easier to introduce the institutional reforms necessary to converge into a fully-fledged political union. This column examines convergence among early EMU entrants in terms of public services, product and labour markets regulation, and quality of institutions. The main message is pretty clear: the viability of the EMU project seems to be more in trouble on political rather than economic grounds.

Rafael Doménech, Miguel Otero Iglesias, Federico Steinberg, 15 June 2018

Deepening of EMU cannot wait until all countries have carried out all their domestic reforms, both risk sharing and risk reduction need to proceed simultaneously. In fact, all euro area countries are exposed to the risk of an incomplete monetary and economic union but with very asymmetric costs. This column, part of the VoxEU debate on euro area reform, argues that this risk can only be tackled with common instruments and policies at the European level, whose mere existence will reduce not only its magnitude but also its asymmetric consequences. 

Roel Beetsma, Martin Larch, 10 May 2018

The key question in the policy debate on the next steps for the Economic and Monetary Union seems to be whether we can progress with integration in a context where some countries perceive themselves as consistently paying for policy mistakes of others, while others see themselves victims of a moral diktat. This column, adding to VoxEU's Euro Area Reform debate, argues that the policy dilemma around a central fiscal capacity can only be overcome if fiscal risk sharing and risk reduction advance in parallel. Therefore, reform of EU fiscal rules need to receive more attention. 

Ramon Marimon, Thomas Cooley, 01 May 2018

The Horizon 2020 ADEMU project has aimed to reassess the fiscal and monetary framework of the Economic and Monetary Union in the wake of the euro crisis. This column introduces a new VoxEU ebook which presents the main findings from the project, including the lessons we can extract from the crisis and the policy response. It also outlines the two main proposals arising from the project relating to the European Stability Fund and a European Unemployment Insurance System.

Marco Buti, Gabriele Giudice, José Leandro, 25 April 2018

The debate on deepening EMU is entering a critical stage. This column, contributing to VoxEU's Euro Area Reform debate argues that while the proposals in a recent CEPR Policy Insight are both timely and attractive, the mix seems unbalanced and carries significant risks. The focus of the proposals on reducing fiscal risks could lead to financial distress, ultimately requiring more, not fewer, rescues.

Vesa Vihriälä, 13 April 2018

The smooth functioning of the EMU requires risk sharing. This column, which joins VoxEU's Euro Area Reform debate, argues, however, that its best use is not in the support of fiscal expansion in recession countries, but in ensuring the liquidity of solvent sovereigns under market pressure. Giving the ESM/EMF access to central bank financing should be explored as a means to facilitate it.

Nauro Campos, Corrado Macchiarelli, 12 March 2018

The concepts of core and periphery remain ubiquitous and elusive in the European integration debate. This column documents the formation and evolution of a core and periphery in EMU, unearthing an increasingly integrated core, an entrenched periphery, and a third set of countries marked by in-and-out movements.  Using a novel measure to capture the probability of a country being classified as peripheral, it reveals that this probability positively correlates with euro membership and flexible product market regulations.

Nauro Campos, Jarko Fidrmuc, Iikka Korhonen, 26 September 2017

The debate about the future of the Economic and Monetary Union entails a careful examination of the costs and benefits of the European single currency. This column takes stock of the empirical evidence on the euro’s effects on business cycle synchronisation. We find that synchronisation across European countries increased by 50% after 1999 (the year the euro was introduced) and that this increase was more pronounced in euro area countries.

Marco Buti, Servaas Deroose, José Leandro, Gabriele Giudice, 13 July 2017

Despite much being done to strengthen the Economic and Monetary Union, it remains incomplete and this is one of the main reasons for the Eurozone's lacklustre economic performance in the recent years. While there are still diverging views on how to "cross the river", there is also a political and economic window of opportunity to complete the EMU architecture. This column discusses the ideas presented in a new European Commission Reflection Paper aimed at relaunching the debate on how to move forward, with a focus on bridging the differences between the member states that stress responsibility and risk reduction and those calling for solidarity and risk sharing.

Enrico Perotti, 04 April 2017

The members of the Eurozone are diverse in terms of their institutional quality. This column outlines the redistributive effects created by the rigid structure of a monetary union next to its direct effects on monetary credibility, and highlights the general equilibrium benefits that core countries draw from it and the cost paid by the productive sector in ‘weaker’ countries. Europe faces a clear challenge, but the success of the transition to the banking union suggests that collective efforts towards institutional evolution can succeed.

Nauro Campos, Corrado Macchiarelli, 19 October 2016

Explanations for the Eurozone Crisis rely on the notion of cross-country asymmetries. The core-periphery pattern to the EU was first established by Bayoumi and Eichengreen in 1993, prior to the Eurozone. This column replicates their approach to explore whether the euro has strengthened or weakened this pattern. A new ‘coreness index’ indicates that the core-periphery pattern has weakened, and that a new, smaller periphery has emerged.

Igor Masten, Ana Grdović Gnip, 13 October 2016

Fiscal policies in European Economic and Monetary Union states are being reinforced. This column argues that the cyclically adjusted budget balance will be an imprecise tool for measuring fiscal discipline, and structural deficit rules limits are too stringent. If the official methodology is used to trigger corrective fiscal contractions, it may increase macroeconomic instability.

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