How to Reform the Incomplete EMU?

Abstract

The chapter examines how it is possible to design a mechanism to relieve the well-known problems of the incomplete Economic and Monetary Union (EMU) and thus reduce its costs. A monetary union can be very fragile and governments of member countries face serious adjustment problems, especially when hit by large, permanent asymetric shocks This leaves the EU with the problem of unsustained debts and fiscal unsustainability. This chapter explores the possibility the EU becomes a fiscal union i.e. “full/complete monetary union” by focusing on the EMU agenda of the EU and evaluating future challenges. In light of findings, some policy implications are drawn.