This paper addresses aspects of the interaction between labor market institutions and the process of Economic and Monetary Union in Europe. It reviews the nature and possible motivation of institutions which limit both wage and employment flexibility in Europe, with particular attention to the...

A perceived need to increase nominal wage flexibility as a substitute for domestic monetary policy and a tendency to less wage moderation are likelyto promote bargaining co-ordination and social pacts in the EMU. But such co-ordination is not likely to be sustainable in the long run, as it...