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European monetary union and national labour markets

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  • Rühmann, Peter

Abstract

When a nation joins EMU it relinquishes monetary policy tools and its economy becomes more and more exposed to international competition. This has provoked (sometimes quite opposing) fears concerning the future of "Euroland". With respect to the labour markets of the EMU-zone some authors expect a catching-up of wages irrespectively of differences in productivity while others are suspicious of a process of competitive underbidding. Before addressing this controversy in chapter 4, the changes will be described that are relevant for the labour markets' participants and that have been brought about by the start of EMU. Since the beginning of this year the member states of the European Monetary Union no longer have at their disposal the instruments of monetary policy or the ability to adjust exchange rates. Further, the Stability and Growth Pact restrains their fiscal autonomy. The second chapter of this paper contains some general considerations of the consequences that may result from this fundamental change in the conduct of economic policy. At the same time, EMU probably will intensify the process of transnational economic integration and, thus, may further diminish the manoeuvrability of the member states. In the third chapter we will look at the effects of this development on the national labour markets in some detail. It is certainly not clear how the participants in the labour markets will respond to the important changes in the environment in which they operate. Some of the alternatives that have been discussed particularly in Germany, will be presented in the fourth chapter.

Suggested Citation

  • Rühmann, Peter, 1999. "European monetary union and national labour markets," Center for European, Governance and Economic Development Research Discussion Papers 3, University of Goettingen, Department of Economics.
  • Handle: RePEc:zbw:cegedp:3
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    1. Kenneth Rogoff, 1996. "The Purchasing Power Parity Puzzle," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 647-668, June.
    2. Dohse, Dirk & Krieger-Boden, Christiane & Siebert, Horst, 1998. "Währungsunion und Arbeitsmarkt: Auftakt zu unabdingbaren Reformen," Open Access Publications from Kiel Institute for the World Economy 997, Kiel Institute for the World Economy (IfW).
    3. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
    4. Dani Rodrik, 1998. "Symposium on Globalization in Perspective: An Introduction," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 3-8, Fall.
    5. Cornwell, Christopher Mark & Wächter, Jens-Uwe, 1999. "Productivity convergence and economic growth: A frontier production function approach," ZEI Working Papers B 06-1999, University of Bonn, ZEI - Center for European Integration Studies.
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