Economic Policy in Wake of Monetary Union

The path to European Monetary Union (EMU) has been mapped out. The decision has been taken — on the basis of the criteria laid down in the Treaty of Maastricht — that monetary union will begin on time, in January 1999, and which countries will participate in it. In that vein, recent economic policy debates have concentrated on which countries will fulfill the criteria — and the fiscal criterion in particular — and which will not. As necessary as these analyses may have been, it is also important to consider the serious changes that will take place in Europe with the introduction of a single currency. For monetary union will bring about fundamental changes in Europe. The currently fairly large number of smallish, at best medium-sized, and strongly foreign trade-oriented economies will become a large, primarily internal, market. This development will, in the process, alter the basic economic conditions: Economic policies organised along national lines will now be subjected to changed restrictions.