European Economic Governance in the Age of Turbulence
Edited by Carlo Secchi and Antonio Villafranca
Chapter 4: Institutional and Policy Dynamics in the EMU’s Internal Governance and External Representation
Daniela Schwarzer 1. INTRODUCTION The consequences of the global financial and economic crisis clearly do not stop short of the Economic and Monetary Union (EMU). On its tenth anniversary, EMU for the first time has slipped into recession resulting in a massive increase in unemployment and pressure on public finances. Like the previous economic downturn in the years 2002–2003, the current crisis is unlikely to hit all members of EMU with the same impact. Economic divergence will most probably increase. As a consequence, diverging political preferences with regard to economic policy making, are likely to put the governance of the EMU to its first severe test. Meanwhile, on the international scene, the euro has gained attractivity, both for potential future members, as well as in the global financial markets. Nevertheless, a particular challenge consists in affirming the euro’s international role in a changing economic world order. In the euro’s first decade, economic developments and the first political experiences made with the historically unique setting of EMU have led to creeping and explicit modifications of the governance set-up of EMU. The first part of this chapter addresses fundamental economic developments in the EMU and, against this background, turns to the question, in how far internal governance rules and mechanisms have been modified in order to accommodate previously unexpected developments and circumstances. It suggests that some changes in economic thinking are part of the explanation why the internal governance set-up of the EMU has slowly but surely evolved. While the core...
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