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Über dieses Buch

With the abolition of exchange rates the role of wage formation in the European Monetary Union changes fundamentally and national economic policy in particular fiscal policy faces new restrictions. These are analysed in the first two chapters. A major impact is expected for wage formation. To achieve a convergence of economic developments wage finding has to follow in all EMU member countries basically the same rules. An empirical investigation using econometric methods show that this is presently not yet the case. In particular in the southern European countries wage finding is different from that in the rest of the EMU. Frequently the introduction of Euro is perceived as a signal to lower wages all over Europe to overcome the dismal employment situation. The book addresses the question whether such a race for lower wages is appropriate in terms of employment creation.

Inhaltsverzeichnis

Frontmatter

1. Economic Policy in Wake of Monetary Union

Abstract
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.
Gustav A. Horn, Wolfgang Scheremet, Rudolf Zwiener

2. An Economic Policy Framework for European Monetary Union

Abstract
The development of the European labour market following the introduction of monetary union is one of the cornerstones on which the success — but also the failure — of EMU will rest. Therefore, in order to reach conclusions about the consequences of monetary union, an understanding of the economic correlations of the labour market is vital. Statements on the employment effects of certain economic conditions for monetary union can, of course, only be made against the backdrop of theoretical models, and are therefore also affected by the schism that has run through economic theory for quite some time. The decisive delineation that has existed in theoretical debates for decades runs between the neoclassical concept (which assumes virtually unlimited price and wage flexibility, or consid­ers it desirable), and the Keynesian approach (in which there are rigidities, which are considered a constitutive element of a dynamic market system). Depending on the theoretical backdrop, one reaches different conclusions for, for example, monetary and fical policy action, and therefore also of the dangers that result from certain strategies. Aspects that may appear advantageous in one model can give rise to serious problems in the other. Therefore, in order to properly understand the basic economic conditions, the theoretical conditionality must at all times be clear. This further means that the assessment of Europe’s future economic devel­opment following the introduction of monetary union depends quite fundamen­tally on the viewpoint of the model used.
Gustav A. Horn, Wolfgang Scheremet, Rudolf Zwiener

3. The Role of Wage Policy after the Introduction of Monetary Union

Abstract
With the introduction of European Economic and Monetary Union (EMU), wage policy is being allocated a decisive role in the EU member states. With the loss of sovereignity over an independent monetary policy and an independent currency, differences in inflation rates in tradable goods between the individual countries are no longer possible. If regional competitiveness is not to be endangered, in a monetary fully integrated market nominal wage increases are limited by the expected productivity growth in the home country and the trend of unit labour costs in the other countries. This restriction is also true for social security systems, which are financed by employers contributions: if contribution rates rise, wage policy must take such increases into account so as not to affect unit labour costs. Sanctions in the case of damage to price stability, which manifests itself in rising unemployment, no longer occur with a pronounced delay (as would be the case with national monetary policy, which may initially tolerate a higher inflation rate and only later takes a restrictive course) but immediately, with the loss of regional competitiveness. This increases the pressure for fast wage adjustment. Furthermore, European monetary policy imposes a more general restriction for wage policy throughout Europe. The relationship between wage policy and monetary policy, which used to be determined at the national level for countries with independent currencies, will now be determined at the European level.
Gustav A. Horn, Wolfgang Scheremet, Rudolf Zwiener

4. Simulations on the Future Development of the European Labour Market

Abstract
The simulations were carried out on the basis of the Oxford Economic Forecasting (OEF) model, an econometric multi-country model that encompasses the main economic links between economies, i.e. trade flows, interest rates, and exchange rates.100 In the case of this particular analysis, the modelling of the labour market is of decisive significance.
Gustav A. Horn, Wolfgang Scheremet, Rudolf Zwiener

5. Conclusions and Economic Policy Recommendations

Abstract
The aim of this study has been to outline labour market preconditions with which both the growth process in Europe as a whole and the convergence between the individual member states of the European Monetary Union can be stimulated. The analysis of wage policy in Europe has shown, however, that the course leading up to monetary union has not yet been completed. Even though Europe’s convergence process has been impressive in the last few years, some countries have not yet taken all the steps; what is missing in particular is a general European wage policy concept to adequately equip Europe for the monetary union. At present, wage policy is still based on too many different concepts for there to be no danger of regional imbalances with regard to growth and employment, provided the status quo is maintained. This could strengthen the call for regional transfers.
Gustav A. Horn, Wolfgang Scheremet, Rudolf Zwiener

Backmatter

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