This paper reviews the pros and cons of institutionalized constraints limiting the freedom of national budgetary policies within an Economic and Monetary Union (EMU) in Europe. The issue is approached from three angles: the influence of EMU on (i) budget discipline; (ii) intergenerational equity...

The paper argues that international differences in fiscal conditions influence the relative attractiveness of locating production facilities in different countries and could prove to be a troublesome source of instability for the European economies. Even though physical capital movements tend to...