Co-ordination of Economic Policies in EMU

The launch of the single European currency raises a number of issues with regard to co-ordination of economic policies at European and national level. The ongoing discussion on whether to place the independent European Central Bank within the frame of a more comprehensive economic policy concept is, in the ultimate analysis, rooted in ideological differences. The practicability of the tools that have been developed for co-ordination, primarily among them the stability and growth pact, will be put to the test in the event that recessionary trends should emerge in EMU. Lacking co-ordination between national tax systems will enhance the trend towards unilateral harmonisation at national level. In the member states, it appears that the greatest challenge is for wage policies to secure growth and employment. However, national wage policies are made more difficult by the effects of increasing integration, and there is a general trend towards reducing their level of centralisation. It should also be noted that measures to shape conditions for business locations may be a powerful parameter of national economic policy, even though they will hardly be effective in the short term.