Institutional Reforms

This section focusses on how the institutional architecture of the economic and monetary union (EMU) evolved from the launch of the euro until mid-2019. While first attempts to build a monetary union in Europe can be traced back to the end of the 1960s, the basis for the EMU was set with the Delors report of 1989. During the first years of the EMU, the focus was on establishing the foundations of the European Central Bank and the fiscal surveillance framework. However, this focus on monetary and budgetary developments meant that structural differences between EU Member States left them vulnerable to very large macroeconomic imbalances, exposing the euro area to the economic and financial crisis, which started in 2008. The EMU’s institutional architecture became stronger as a result of lessons learnt during the crisis. However, it also became more complex and increasingly subject to intergovernmental solutions and new institutions that were not accountable at EU level. In addition, the rules-based approach to governance has revealed its limitations in delivering a symmetric adjustment and achieving a proper policy mix. This creates potential tensions in the single market area and impedes the international role of the euro. To build a more resilient EMU governance, it could be considered to rebalance it towards stronger institutions — for instance through a representative for economic affairs supported by a treasury — and more effective market discipline to complement the rules-based approach.