8 - How to Reform the EU and the EMU: Broad Outlines

Summary

Chapter 8 starts from the observation that the theoretical foundations of the EMU are largely outdated and have shown a number of faults. The chapter suggests the broad lines along which the EMU could be reformed and indicates different growth and short-term strategies for the institutions as well as macroeconomic and microeconomic policies. It must certainly be realized that the economic performance in Europe has been nourished not only by the inadequacies in the Monetary Union institutions, but also by the way European policymakers, at all levels, operated, first in facilitating the development of the Great Recession in Europe and also in compounding its solution. In fact, the policies implemented to face it can make it clear why it prolonged beyond the period over which it hit the United States. Thus, the possible benefit of avoiding military confrontation between European countries must be balanced against the rising populism and resentment of some European countries against the others due to the clear insufficiency of European institutions and policies in dealing with the crisis. These can have lasting negative political consequences on the future of the Union. The need then arises of a deep reform of the EMU.