Implications of EMU for the European Community
Chris Kirrane

TL;DR
This paper discusses the economic implications and policy choices of the European Monetary Union (EMU), emphasizing its benefits, costs, and institutional arrangements, with a focus on France's economic policy adjustments.
Contribution
It provides an analysis of the EMU's institutional framework, economic foundations, and policy implications, especially regarding national sovereignty and asymmetric shock absorption.
Findings
EMU requires greater wage flexibility and fiscal policy role.
Full monetary union involves significant costs and institutional changes.
EMU impacts national economic policies, especially for France.
Abstract
Monetary integration has both costs and benefits. Europeans have a strong aversion to exchange rate instability. From this perspective, the EMS has shown its limits and full monetary union involving a single currency appears to be a necessity. This is the goal of the EMU project contained in the Maastricht Treaty. This paper examines the pertinent choices: independence of the Central Bank, budgetary discipline and economic policy coordination. Therefore, the implications of EMU for the economic policy of France will be examined. If the external force disappears, the public sector still cannot circumvent its solvency constraint. The instrument of national monetary policy will not be available so the absorption of asymmetric shocks will require greater wage flexibility and fiscal policy will play a greater role. The paper includes three parts. The first concerns the economic foundations…
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Taxonomy
TopicsGlobal Financial Crisis and Policies · European Monetary and Fiscal Policies · Fiscal Policies and Political Economy
