ECON I

ECON-I

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Committee on Economic and Monetary Affairs I (ECON I):

The faulty set-up of the Eurozone? Should the EU compensate for its Member States‘ lost ability to shape monetary policy and how can the issue of macroeconomic imbalances within the Union best be addressed?

Committee Article

The economic and financial crisis has revealed a number of weaknesses in the economic governance and set-up of the Economic and Monetary Union (EMU). Against the background of the current crisis important measures to improve the economic governance in the EU and the euro area in particular have been taken. The cornerstone of the EU response is the new set of rules on enhanced EU economic governance, the so-called “Six-Pack” legislation. EU Member States have replaced the Stability and Growth Pact with a new stricter version - Fiscal Compact, introduced a new surveillance and enforcement mechanism to prevent or correct macroeconomic imbalances and are increasingly coordinating structural policies. The eurozone has enacted some limited fiscal integration, for example in peer review of each other’s national budgets. Having new measures and mechanism in place does not eliminate the question if these steps are sufficient to strengthen the EMU and to ensure the success of the euro in the long run. With the inherent design and management failures of the EMU, is a much greater fiscal union a natural next step in European integration or a way to break-up the Eurozone? What are the implications of the Fiscal Compact and other reforms for democracy and legitimacy in the EU? To which extent can budgetary flexibility can be allowed and is there a politically feasible way to move towards a future fiscal union, a single fiscal policy?

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