9 - How to Reform the EU and the EMU

Summary

Chapter 9 deals first with the reforms needed for the cornerstones of the EMU macroeconomic policies, i.e. the common monetary policy and the macro-prudential regulation that has recently added to it. As to the former, one of the main proposals is to raise its optimal target, for reasons that add to those recently suggested by some eminent economists; in addition, the prohibition to the ECB to act as a lender of last resort to governments should be reconsidered. As to the latter, the need arises of strengthening the existing legislation. On the other hand, fiscal policy is the Cinderella of the EMU macroeconomic policies and its deflationary and asymmetric orientation, to which the fiscal compact has recently added, is to be radically reconsidered, moving towards a fiscal union. Finally, wage policy can be implemented in a way to help dealing with the different country structural problems in a way that cannot be done by the common monetary policy.