A Question of Fit for EMU:Process and Policy in the Fiscal Domain

This paper examines the nature and effectiveness of rule based legal requirements and more informal measures for government cooperation in economic policy measures to coordinate monetary and fiscal policy. The analysis considers the objectives of EU economic policy, the Stability and Growth Pact, other EU coordination processes, and the relationship between ECB credibility and fiscal policy. The conclusion is that although the problem of monetary and fiscal policy co-ordination remains unsolved by the SGP this has not so far represented a fundamental flaw in the design of EMU but the system has yet to be tested in more difficult recessionary circumstances.