Euro Area Macroeconomics. Where Do We Stand 20 Years Later?

For almost 20 years, euro area countries have been sharing a single currency. The drawbacks of the euro area framework were highlighted by the widening of imbalances prior to the 2007 financial crisis, and thereafter by the huge impact of the financial crisis, the public debt crisis in Southern European countries, and the Great Recession. Prior to and after the crisis, EU institutions and Member States (MS) have not been able to implement either a common economic strategy or satisfactory economic policy coordination. This led neither to a bursting of the euro area, nor to a substantial change in its functioning. Euro area institutions were adapted, through the European Stability Mechanism, the Fiscal Treaty, the ?first semester?, the European Central Bank?s support to MS, and the banking union. These adaptations were painful. In mid-2018, the economic situation had clearly improved at the euro area level. However, the following question remains unsolved: can the functioning of the euro area be improved, accounting for divergent situations, interests and views in MS? The paper recalls proposals from EU institutions and from MS. We present and discuss a number of proposals made by economists to improve the euro area policy framework: relying on financial markets to control domestic economic policies, introducing a euro area budget and a minister of finance, moving towards a federal EU with increased democracy, and last, improving economic policy coordination.