Chapter 1 outlines why we wrote the book, namely, to provide a clear-cut account of the EU’s ‘silent revolution’ leading to a much more vertical new economic governance (NEG) regime after the crisis of 2008 and its effects on European employment relations, public services, welfare states, and democracy; to develop a new analytical paradigm capable of capturing the interplay between the supranational formulation of the EU’s NEG prescriptions, their country-specific deployment, and their effects on labour politics and democracy; to empirically assess the policy orientation of EU interventions in two policy areas (employment relations and public services), three public service sectors (transport, water, and healthcare), and four countries (Germany, Italy, Ireland, Romania), during the pre-NEG (1957–2008), the NEG (2009–2020), and the post-Covid-19 (2020–2022) period; to analyse the responses of unions and social movements to these NEG interventions since 2009, and their feedback effects on the EU’s post-Covid NEG regime; to show that labour politics matters, as unions and social movements are essential in framing the struggles about the policy direction of EU economic governance along a commodification–decommodification axis rather than a national–EU politics axis – a direction that may lead to the EU’s disintegration.

This chapter considers Economic and Monetary Union (EMU). Nineteen States currently have the euro as their currency. EMU is built around three pillars. There is, first, an independent European Central Bank with the exclusive right to authorise the issue of the euro. It has also developed extensive powers to purchase large amounts of securities to stimulate weak economic performance in part of the euro area, and of prudential supervision over credit institutions within the euro area. States not participating in the euro are not bound by its decisions. Secondly, States commit not to incur excessive deficits, to run balanced budgets over the medium term and to correct macroeconomic imbalances. Euro area States can be subject to heavy sanctions for not meeting their obligations. Thirdly, there is coordination of domestic economic policy. The central arena for oversight of much of this is the European Semester for Economic Policy Coordination. There, the EU Institutions assess domestic economic and fiscal performance as well as performance in the fields of social policy and climate change, with recommendations to be implemented by States in their budgets in the subsequent year.

In order to extract economic criteria for European fiscal federalism, Chapter 3 examines public accounts statistics and the economic literature on EMU from 1992 through the European sovereign debt crisis. It follows a chain of macroeconomic indicators running from nominal interest-rate convergence to the sovereign debt crisis. It examines nominal interest-rate convergence; structural determinants of sovereign bond yields; real interest rates; private-sector domestic credit; cross-border credit flows; consolidated banking claims; current-account imbalances; real effective exchange-rates; public and private-sector debt; the sovereign-bank feedback loop; and fiscal policy. The analysis finds that the Euro Crisis was a private debt crisis, not a public one. The causa sine qua non of the crisis is a severe mispricing of private and public debt caused by a failure of Articles 121-126 TFEU to induce markets to differentiate between sovereign borrowers under a (now realised) bailout expectation – not sovereign debt.

Over recent years, a consensus has emerged that 'policy failures that allowed imbalances to get so large' were probably the main root cause of the Euro area crisis.Reflecting this, the new Euro area governance arrangements include a Macroeconomic Imbalances Procedure (MIP) that seeks to identify and take corrective action against emerging imbalances.This chapter uses a Bayesian structural VAR model to assess the feasibility of managing macroeconomic imbalances in the Euro area using four macroeconomic policy tools:fiscal policy, macroprudential policy, product market structural reforms and labour market reforms.Consistent with the emerging literature, it finds that managing macroeconomic imbalances is likely to be difficult.However, it raises the tantalising prospect that a combination of eliminating structural rigidities before macroeconomic imbalances arise plus using macroprudential policy to manage emerging macroeconomic imbalances could be effective.

Chapter 2 provides an overview of theories and empirics of recession and depression, reviewing Austrian, Keynesian, and monetarist financial theories, and secular stagnation approaches to economic slumps. It looks at international , national, and regional recessions and the different shapes of business cycles (V, U, L and W). The chapter also discusses international dimensions of slumps and the scope and limits for undertaking countercyclical policies.