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Trouble with EMU: fiscal policy and its implications for inter-country adjustment and the wage-bargaining process

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  • Christopher Allsopp

    (New College, Oxford University)

  • Andrew Watt

    (ETUI)

Abstract

This article takes a somewhat unusual line on the Stability and Growth Pact. While the Pact clearly suffers from very considerable defects, in fact many of the problems encountered in the area of fiscal policy originate elsewhere, notably in monetary policy and in the neglected problems of inter-country adjustment in a common currency area. The linkáges between these areas and the Pact, with its asymmetrical form of operation, are discussed, along with reform ideas for the Pact. The authors conclude that a greater focus on national inflation targets - implying stronger coordination with wage trends - rather than the present focus on unattainable deficit targets is an avenue that needs to be explored.

Suggested Citation

  • Christopher Allsopp & Andrew Watt, 2003. "Trouble with EMU: fiscal policy and its implications for inter-country adjustment and the wage-bargaining process," Transfer: European Review of Labour and Research, , vol. 9(4), pages 646-664, November.
    • Handle: RePEc:sae:treure:v:9:y:2003:i:4:p:646-664
    DOI: 10.1177/102425890300900409
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    References listed on IDEAS

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    1. Xavier Sala-i-Martin & Jeffrey Sachs, 1991. "Fiscal Federalism and Optimum Currency Areas: Evidence for Europe From the United States," NBER Working Papers 3855, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Andrew Watt, 2011. "Economic governance in Europe in the wake of the crisis: reform proposals and their alternatives," Transfer: European Review of Labour and Research, , vol. 17(2), pages 255-261, May.

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