Our work assists and supports the EMU reform process by commenting on issues that obstruct political progress. It focuses on four interdependent areas:
A. The economic foundations of EMU: Single Market integration, structural reforms, and convergence
We describe the economic preconditions that are needed so that the EMU can function smoothly, and suggest ways of fulfilling them.
- Is there a need for more structural convergence and deepening of the Single Market?
- What are the best policy instruments when it comes to promoting convergence in the euro area?
- How can we achieve a balance between a high level of adjustment capacity and the complementarity of existing economic structures?
B. Governing EMU: rules, coordination, and institutions
The project examines whether additional governance instruments are needed to stabilize the euro area. It assesses existing proposals, develops new instruments as and when needed and identifies the functional equivalents of contested economic institutions.
- To what extent is it realistic to expect convergence and domestic reform to provide stability, and where are institutions necessary?
- What instruments are needed, and how would they interact?
- What kind of structure could make it possible to weigh the need for solidarity against the possibility of moral hazard?
C. The legal dimension: treaty amendment and the relationship between the EMU and the EU28
We evaluate the legal feasibility of the reform proposals and explore the options for rule-setting among the euro area member states. Another topic is the relationship between euro area member states and EU countries that do not have the common currency.
- Which reforms can be implemented within the Treaty of Lisbon?
- What are the advantages and disadvantages of various types of treaty amendment?
- What kind of relationship between the euro area and the remainder of the EU is appropriate and sustainable?
D. The reform process: legitimacy, compliance, and exit option
The reform process, in contradistinction to the content of the reforms, merits special attention. We develop proposals on how to provide incentives, ensure compliance over time, and enhance EMU legitimacy.
- What is the best way of dealing with the issues of credible commitment and timing?
- Should the EMU offer an exit option for euro area member states that are unwilling to accept the implications of a deepened monetary union?
- What is the right balance between legitimacy and effectiveness in the new institutions?