Title: EMU's flawed economic constitution: macroeconomic policy disabled

Authors: Andrew Martin

Addresses: Center for European Studies, Harvard University, USA

Abstract: EMU|s design is seriously flawed. Monetary union was established without political union, creating a single eurozone economy that cannot be governed with the combination of macroeconomic policy instruments that modern national governments have. Its exceptionally independent central bank, the ECB, sets monetary policy for the eurozone economy as a whole, but it has no institutions for setting a eurozone-wide fiscal policy, and hence no democratically accountable structure for setting a eurozone-wide monetary-fiscal policy mix capable of combining growth and employment with price stability. EMU thus lacks democratic legitimacy as well as the capacity to govern the eurozone economy effectively.

Keywords: EMU; macroeconomic policies; Economic and Monetary Union; democratic deficit; eurozone; ECB; European Central Bank; fiscal policy; monetary policy; employment; economic growth; price stability; Euro; business research.

DOI: 10.1504/IJEBR.2010.029729

International Journal of Economics and Business Research, 2010 Vol.2 No.1/2, pp.60 - 75

Published online: 01 Dec 2009 *

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