Since the European Council of June 2012, ‘banking union’ is a key item for the EU's policy agenda. This contribution outlines the state of the policy debate – identifying the elements that are missing but important from a theoretical viewpoint. Concrete proposals are made as to how the...

The massive financial instability of 2007-08 was, in the main, the result of lax monetary policy. Regulation compounded this error by allowing and encouraging excessive leverage and maturity transformation by banks. Innovation did contribute to reckless credit expansion and investments, but...

This article puts forward a methodology to assess the fiscal implications for the new EU members from central and eastern Europe (CEECs) of joining the euro area. An application of this methodology under a specific set of conditions shows that the rules of the ECB on the distribution of...

The notion of a European Monetary Union can be interpreted in different ways. To most non-economists it probably implies a single European currency and a European central bank. To economists, however, a monetary union implies only (in the words of the 1970 Werner Plan): 'the irrevocable fixing...

Disinflation, especially if coupled with financial market liberalization, has implications for public finances because it lowers the revenue from seigniorage. There might thus be a trade-off between the criteria on inflation convergence and public finances that were set at Maastricht. This...

The belief that the European Central Bank (ECB) follows the US Federal Reserve (the Fed) in setting its policy is so entrenched with market participants and commentators that the search for empirical support would seem to be a trivial task. However, this is not the case. We find that the ECB is...

The present governance of the euro area has been devised assuming that the world fits the monetarist-real-business-cycle theory. But that theory is not a correct representation of the world. The European monetary union is a remarkable achievement, but remains fragile because of the absence of a...