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EU Economic Governance and Globalization

Edited by Miriam L. Campanella and Sylvester Eijffinger

It is through a gradual evolution, rather than by grand design, that the somewhat fragmented economic policies of the EU now appear to be heading towards a rather more robust and coherent economic governance. EU Economic Governance and Globalization considers the following crucial question as the EU enters its final stage of institution-building; will the economic institutions of the EU push ahead to reform its rigid national economies and open them up to globalization and international competition?
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Chapter 7: Euro weakness and the ECB economic governance: a strategic institutionalist perspective

Miriam L. Campanella


Miriam L. Campanella INTRODUCTION In transaction cost economics (Williamson, 1975; Ouchi, 1980; Perrow, 1981), economic governance is intended to be a remedial tool for market failures. Either when carried out by state-led institutions or when assigned to independent central agencies, mechanisms of economic governance are meant to restore the terms of market competition and (or) regulate the structure of property rights (North, 1981). European economic integration has given rise to a unique example of evolutionary economic governance generated by supranational institutions designed to deliver and monitor regulatory legislation in sensitive sectors of common interest, ranging from safety standards to market competition, which have normally been the exclusive province of national states. This chapter argues that the ECB, a major EU-level institution designed to take charge of the Euro area monetary policy, has managed its monetary policy beyond the limit maintenance of price stability,1 a major objective of its statutory assignments, keeping the Euro area interest rate policy in tune with macroeconomic responsibility. Whether this attitude developed from the objective rigidities of the European economy and the strictures of its fiscal policy, as some authors have argued (Begg et al., 2002), or from the idiosyncrasy of the monetary area, which made it hard to pursue an inflation rate of less than 2 per cent, it is a matter of fact that the inflation reference value which the bank set as a self-defined target was not achieved. Further, the constant weakness of the Euro on exchange foreign markets...

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