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Candidate countries of central and eastern Europe (CEECs) are suppose to join the EU in 2004, June, which imply that they will face important challenges in the conduct of macroeconomic policy, in order to be able to enter the ERM-II system and eventually enter the EMU (European Monetary Union). Abandoning an independent monetary policy might entail significant costs for countries, which have succeeded in recovering and are in a process of catching-up. However those costs have probably been exaggerated, and their estimation biased by the traditional optimal currency area criteria. The main criticism against a too strong emphasis on the latter rests on two arguments. The first one is that assessing the trade-off for joining the EMU does not deliver the same conclusion ex ante and ex post. Meanwhile, the degree of financial integration will likely increase dramatically, which in turns will decrease the opportunity cost of loosing the monetary policy for absorbing country specific shocks. In a world of capital mobility, the room left for an independent monetary policy is very narrow, maybe close to zero in small, emerging countries, more vulnerable to speculative attacks than countries in the core. The second argument is more empirical. While the link between the exchange rate regime and the fundamentals is rather weak, the political agenda of joining the EU and subsequently the EMU seems to explain the choice of the exchange rate regime.

Published: 16 May 2019 ; This article shows that the troika institutions - the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) - formed a technocratic consensus about the desirability of establishing national fiscal councils in the European Union (EU). Considerable disagreement existed, however, with regards to their design features. Each institution promoted a distinct mode of indirect governance by ranking national fiscal councils depending on their adopted governance model (agent, trustee or orchestrator). This persuasion through entrepreneurial benchmarking constitutes an important mechanism by which member states were nudged to adopt a distinct fiscal council model. Preference heterogeneity among the troika members ultimately prevented the spread of a one-size-fits-all fiscal council in the EU.

The paper evaluates the South Asia Free Trade Agreement (SAFTA) within the global structure of overlapping regional trade agreements (RTAs) using a modified gravity equation. First, it examines the effects of the Trade Liberalization Program which started in 2006. SAFTA would have a minor effect on regional trade flows and the impact on custom duties would be a manageable fiscal shock for most members. Second, the paper ranks the trade effects of other potential RTAs for individual South Asian countries and SAFTA: RTAs with North American Free Trade Agreement (NAFTA) and the European Union (EU

Is the European crisis over? By no means, according to economist and journalist Carlo Bastasin. In fact, the problems that developed between 2008 and 2011 -described in the first edition of Saving Europe - have grown more insidious. The crisis originated when national governments failed to act openly and responsibly, putting in jeopardy not only their own countries but also the well-being of future generations and foreign taxpayers. This failure continued even after the crisis became evident; leaders did not explain clearly to their citizens why the financial crisis had occurred and what was being done about it. From a crisis of politics, it has turned into an outright crisis of European democracy, and a warning for the future of globalization. Carlo Bastasin paints a unique, gripping picture of the events, people, and ideas behind the scenes of the European crisis. From the historic roots to the most recent developments, the author unveils an engrossing chronicle of high drama and individual personalities on the world stage, including presidents, prime ministers, and central bankers. Saving Europe is the definitive book about the financial crisis - and the history as well as the future of Europe's economic and political union. Saving Europe is the definitive book about the financial crisis - and the history as well as the future of Europe's economic and political union. Praise for the first edition of Saving Europe: Bastasin does an admirable job in analysing the euro-zone's economic challenges and is a sure-footed guide through the seemingly endless European Union summit meetings that were supposed to resolve them. He also has an eye for the human detail that makes his sad account of institutional muddle surprisingly compelling. (Financial Times). Bastasin's book is worth reading for its detailed political narrative of the eurozone crisis to date, focusing on the interaction among decision-makers in Europe's capitals . (Foreign Affairs). A reconstruction that may be considered definitive. Revelations on the European negotiations are written with talent and go hand in hand with no-esoteric economic analysis and with the right amount of realism to reach the political substance

AbstractThe CFA franc persists because French elites have mostly followed "territorialist logic" and African elites "capitalist logic" for the last six decades. French governments have conceded to capitalist logic, most dramatically in 1994 with the devaluation of the CFA franc and subsequent introduction of the "Balladur Doctrine." Similarly, West and Central African governments tried to reorient the CFA franc in a more territorialist (developmentalist) direction in the 1970s. Pressure from the IMF, the World Bank, and the French treasury following the sovereign debt crisis of the 1980s pushed most African leaders to accept neoliberal reform—a reassertion of capitalist logic. Advocates of reforming the West African Economic and Monetary Union are currently trying to push the region's monetary policy in a more territorialist direction. The Franco‐African neocolonial alliance has, so far, successfully suppressed efforts toward greater political and economic autonomy in Africa. The CFA's peg to the euro will therefore persist as long as this alliance does; until France decides to abandon its sphere of influence in Africa or African leaders seek greater autonomy and/or new allies.

The recent characterization of German economic hegemony in the Eurozone is oversimplified without a historical and economic analysis of the ascendancy of German economic hegemony in the European Economic and Monetary Union (EMU). The thesis finds that Germany in the EMU negotiations was an economic hegemon, albeit not in a traditional realist sense. Germany neither explicitly stated that it wanted to create the EMU for its economic hegemony nor initiated any attempt for European monetary integration. Ironically, these two traditional hegemonic motives were represented by France. Instead, Germany only assumed the role as the reluctant economic hegemon in the EMU negotiations upon invitation and consent by other countries. The thesis further examines the extent that Germany was able to use its hegemonic bargaining power to embed its economic hegemony in the institutional framework of the EMU. Using a Post-Keynesian economic lens, the paper finds that the hegemonic vacuum opened by the flawed institutional structure of the Euro for the dominant economic country to fulfill in a financial crisis did not automatically coincide with Germany. For that reason, German economic hegemony was the inadvertent outcome of the collective economic ignorance underpinning the EMU.

With the creation of the Economic and Monetary Union and the euro, the national government debt of eurozone member-states became credit sensitive. While the potentially destabilizing impact of adverse cyclical conditions on credit-sensitive debt was seriously underestimated, the design was intentional, framed within a Friedman-Fischer-Buchanan view that "no monetization" rules provide a powerful means to discipline government behavior. While most countries follow some kind of "no monetization" rule, the one embraced by the eurozone was special, as it also prevented monetization on the secondary market for debt. This made all eurozone public debt defaultable - at least until the European Central Bank (ECB) announced the Outright Monetary Transactionsprogram, which can be seen as an enhanced rule-based approach that makes governments solvent on the condition that they balance their budgets. This has further narrowed Europe's options for policy solutions that are conducive to job creation. An approach that would require no immediate changes in the European Union's (EU) political structure would be for the EU to fund "net government spending in the interest of Europe" through the issue of a eurobond backed by the ECB.

Membership in the monetary union imposes higher demands on factor market flexibility, since neither the exchange rate nor monetary policies can be used to deal with country-specific shocks. In this paper we assess the ability of the twelve new EU member states (NMS-12) to dampen the impact of shocks by means of macroeconomic wage flexibility. Following the structural VAR approach elaborated in Moore and Pentecost (2006), real wage flexibility is measured by the responsiveness of real wages to real (permanent) and nominal (temporary) shocks. The analysis of Moore and Pentecost (2006) is extended in three ways: by employing a new Eurostat labour cost data set covering 1996Q1 to 2007Q3, by using a large sample of 24 EU member countries, and by assessing the sensitivity of the results to the sample length. We find evidence of heterogeneous real wage adjustment across the new as well as the mature EU economies. Overall, the degree of real wage flexibility in the NMS-12 lies within the bounds of the corresponding values for the Euro Area 'core' and 'peripheral' member countries.

We present a two-country New Open Economy Macro model of the Austrian economy within the European Union's Economic & Monetary Union (EMU). The model includes both nominal and real frictions that have proven to be important in matching business cycle facts, and that allows for an investigation of the effects and cross-country transmission of a number of structural shocks: shocks to technologies, shocks to preferences, cost-push type shocks and policy shocks. The model is estimated using Bayesian methods on quarterly data covering the period of 1976:Q1-2005:Q1. In addition to the assessment of the relative importance of various shocks, the model also allows to investigate effects of the monetary regime switch with the final stage of the EMU and investigates in how far this has altered macroeconomic transmission. We find that Austria's economy appears to react stronger to demand shocks, while in the rest of the Euro Area supply shocks have a stronger impact. Comparing the estimations on pre-EMU and EMU subsamples we find that the contribution of (rest of the) Euro Area shocks to Austria's business cycle fluctuations has increased significantly.

The framework for fiscal policy coordination in EMU has been in effect for three years.The experience gained shows that the rule-based approach provides in principle a feasible solution for policy coordination among a large number of heterogeneous countries whose joint interest is to safeguard the credibility of the common monetary policy and smooth functioning of the EMU.At the same time, the experience indicates that the current set of rules and procedures laid down in the Maastricht Treaty and Stability and Growth Pact (SGP) suffer from complexity, lack of transparency and asymmetric incentives.The paper discusses the rationale for fiscal policy coordination in the monetary union in general and emphasises the role of fiscal rules and multilateral surveillance in ensuring discipline and long-term sustainability of public finances.The paper also considers incentive problems arising from the asymmetric nature of the SGP and weak interaction between national policy-making and EU-level policy commitments.As a possible remedy, the paper proposes complementing the SGP with medium-term expenditure rules for central governments and balanced budget requirements for lower levels of government.

With a view to better understanding why the `Maastricht EMU' — contrary to various proposals for Economic and Monetary Union from early history of European monetary integration — gives priority to `sound money and finances' and central bank independence over other macro-economic objectives, it is suggested that the EMU be considered as being the very last stage of an `ideational life-cycle' that took off at the end of the 1970s. Contrary to approaches which focus on the strategic negotiations during the Intergovernmental Conference at the beginning of the 1990s, it is argued that EMU ideas can be better understood if the major areas of agreement, consensus, shared knowledge structures, or simply causal ideas, are studied rather than areas of conflict and disagreement. It is argued that the ideational life-cycle helps us to grasp why there was in fact so little controversy among European elites by the end of the 1980s about such basic issues as central bank independence, price stability, and sound finance convergence criteria. EMU ideas are results of uncontroversial and transnational agreement at the elite level rather than strategic bargaining.

The European sovereign debt crisis has revealed severe flaws in the design of the internal market. Both, private and public borrowers had incentives for excessive borrowing, which have been created by deficits in the regulatory structure of financial markets. Capital requirements for banks were too low and had procyclical effects (Favara and Ratnovski 2012). Supervision has been ineffective with regard to containing the build-up of risks in banks' balance sheets. Common monetary policy in the Euro Area has not been accompanied by the transfer of authority to supervise and restructure banks which has, in turn, created incentives to shift risks to the European level. Risks of banks and states have become dangerously intertwined. Proposals for a banking union aim at correcting these deficits. In principle, a banking union is a necessary complement to other elements of the internal market. In an integrated capital market, banking distress in one country can have negative externalities for the stability of financial systems in other countries. Such risks are even more pronounced if other countries are affected through a common monetary policy. The banking union currently being discussed has three elements (President of the European Council 2012): banking supervision at the European level, a European authority for bank restructuring and resolution financed by a bank resolution fund, and a European deposit insurance fund. So far, concrete proposals have been made for the establishment of a Single Supervisory Mechanism only. However, a banking union is a long-term project. It is not the key to a solution to the acute problems in Europe's banking sectors (Buch and Weigert 2012, GCEE 2012a). ; Die europäische Schuldenkrise hat zentrale Defizite des Binnenmarkts offengelegt. Regulatorische Defizite haben Anreize geschaffen, eine zu hohe Verschuldung einzugehen. Zwar wurde eine einheitliche Geldpolitik verfolgt, gleichzeitig aber die Kompetenzen für die Aufsicht und Restrukturierung von Banken auf nationaler Ebene belassen. So sind Anreize entstanden, Risiken auf die europäische Ebene zu verlagern. Eine Bankenunion und die Etablierung eines einheitlichen Aufsichtsmechanismus haben das Ziel, diese Defizite zu beheben. Grundsätzlich ist eine Bankenunion eine notwendige Ergänzung des Binnenmarkts. Sie ist aber vor allem ein langfristiges Projekt, das keinesfalls das aktuelle Problem des privaten und öffentlichen Schuldenüberhangs lösen kann (Buch und Weigert, 2012; SVR, 2012a).