During the ‘Golden Age’ that lasted until the mid-1970s, Europe witnessed a "public finance" phase, when the three sides of Musgrave’s triangle - allocative efficiency, redistribution and cyclical stabilisation - seemed to reinforce one another. EMU's fiscal rules - embodied in the...

Germany is generally regarded as the nominal anchor for Europe. Its participation is the sine qua non of EMU. It has been the largest net contributor to EU finances, the leading proponent of greater economic and political union, and the leading example of the virtues of fiscal and monetary...

The paper reviews and evaluates in a non-technical manner the economic and political arguments for and against the two fiscal convergence criteria written into the Treaty of Maastricht and its Protocols. In order to qualify for full membership in Economic and Monetary Union (EMU), net general...

It is widely argued that Europe's unified monetary policy calls for international coordination at the fiscal level. We survey the issues involved with such coordination of fiscal policy as a demand management tool and we use a simple model to investigate the circumstances under which...

The paper emphasizes the distinction between the purely fiscal reasons for fiscal policy coordination under EMU (given a credible low-inflation policy by the ECB), and the spillover effects of an uncoordinated fiscal policy on monetary policy. The worst scenario is where an independent ECB sets...

This paper studies the strategic interaction of Euroland's national macroeconomic players and the ECB council under two alternative assumptions on central bank behavior: (i) all members of the ECB council are concerned about Euroland's macroeconomic aggregates and (ii) the ECB council is...

Regional systems of governance may resolve some of the dilemmas of global financial integration, and the eurozone is among the most advanced examples of attempts to do so. This paper argues that the recent Euroland sovereign debt crisis is a test of this proposition, and the outcome leaves the...

This paper argues that the crisis was an outcome of EMU: setting a common monetary policy for countries with different initial inflation rates. The crisis countries were those with high inflation rates which then had negative real interest rates and consequently over-borrowed. Current policy...

The Stability and Growth Pact (SGP) contains a serious error: the way governments are expected to account for public investment. Correcting this error and applying, as article 104.3 of the EU Treaty allows, the current rules of the Pact to a measure of the budget where the treatment of...

Analysis of the design of institutions to counteract failures of monetary commitment has largely proceeded in a vacuum. It has ignored similar commitment problems in fiscal policy and in structural adjustment; and it has ignored coordination problems between monetary and fiscal policy. Optimal...