Although growth in the European Union (EU), and in particular in Germany, one of the Euro area's former »sick men«, has speeded up in 2006, the EU and particularly the Euro area continue to face major economic problems. These problems are caused by the restrictive »Maastricht economic policy regime«. To put it shortly, this regime is dominated:
– by the European Central Bank's (ECB) exclusive focus on price stability and its overly ambitious inflation target,
– by the lack of fiscal stabilisation imposed by the Stability and Growth Pact (SGP), even in its revised version,
– and by the focus on structural reforms, particularly in the labour market, which – together with high unemployment – continue to undermine the wage bargainers' ability to set wages with an eye to macroeconomic stability.
Above all, the latter will exert deflationary pressure on the Euro area as a whole as soon as the next recession materialises. This in turn will not only exacerbate the economic problems within the EU but it might even endanger the political project of European integration as such.