Reforming the Architecture of EMU: Ensuring Stability in Europe

41 Pages Posted: 7 Nov 2014

See all articles by Jakob de Haan

Jakob de Haan

De Nederlandsche Bank; University of Groningen

Jeroen Hessel

De Nederlandsche Bank

Niels D. Gilbert

De Nederlandsche Bank

Date Written: November 6, 2014

Abstract

This paper analyses the reforms in the architecture of EMU since the eruption of the euro crisis in 2010. We describe major weaknesses in the original set-up of EMU, such as lack of fiscal discipline, diverging financial cycles and competitiveness positions, and a lack of crisis instruments. These weaknesses appeared against the background of a strong increase in financial integration and financial imbalances since the Maastricht treaty was signed. European policymakers have addressed all weaknesses in the EMU architecture in some way or the other, which is a major achievement. Yet, the effectiveness of the new framework will crucially depend on strict implementation. We discuss whether in the longer run the current balance between policy coordination and risk sharing can be improved upon.

Keywords: Economic and Monetary Union, Financial Cycles, Financial crisis, European debt crisis

JEL Classification: E44, E58, F36, G15, G21

Suggested Citation

de Haan, Jakob and Hessel, Jeroen and Gilbert, Niels D., Reforming the Architecture of EMU: Ensuring Stability in Europe (November 6, 2014). De Nederlandsche Bank Working Paper No. 446, Available at SSRN: https://ssrn.com/abstract=2520389 or http://dx.doi.org/10.2139/ssrn.2520389

Jakob de Haan (Contact Author)

De Nederlandsche Bank

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

University of Groningen

P.O. Box 800
9700 AH Groningen, Groningen 9700 AV
Netherlands

Jeroen Hessel

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Niels D. Gilbert

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

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