The Challenge of the Early Years
Edited by Marco Buti and André Sapir
Jürgen von Hagen and Susanne Mundschenk 1. INTRODUCTION The beginning of Stage III of Economic and Monetary Union (EMU for short) has brought a qualitative change in the framework for economic policy making in the Member States. The combination of the single currency and the single market creates a uniﬁed economic area in which national borders increasingly lose importance for the economic decisions of suppliers and consumers. At the same time, however, large parts of economic policy remain the domain of national or subnational policies. The increasing discrepancy between the European organization of private economic decisions and the national orientation of those parts of economic policy that are not directly regulated by the rules of EMU and the single market is the next, important challenge for the development of economic integration in Europe. The key question is how national economic policies should be coordinated among themselves and with the single monetary policy of the ECB. Economists have analysed this issue from two perspectives. The ﬁrst takes the organization of economic policies at the national level as given and asks how much coordination of these national policies is necessary.1 Coordination is interpreted as a process of (formal or informal) agreement among independent, national actors. From this perspective, coordination is the exception to the rule. Economic analysis of this process identiﬁes conditions that justify the exception, focusing on the existence and magnitude of international ‘spillovers’ or policy externalities. The alternative perspective takes the common economic area as the starting...
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