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The Euro Area Crisis in Constitutional Perspective$
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Alicia Hinarejos

Print publication date: 2015

Print ISBN-13: 9780198714958

Published to Oxford Scholarship Online: August 2015

DOI: 10.1093/acprof:oso/9780198714958.001.0001

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The Evolution of EMU: Challenges and Underlying Principles

The Evolution of EMU: Challenges and Underlying Principles

Chapter:
(p.51) 4 The Evolution of EMU: Challenges and Underlying Principles
Source:
The Euro Area Crisis in Constitutional Perspective
Author(s):

Alicia Hinarejos

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198714958.003.0005

The crisis showed that EMU was not dealing with certain challenges effectively. For EMU to be sustainable as a multilevel system of fiscal and economic governance, it needs to be able to address certain challenges that all federal, multilevel, or fiscally decentralized systems face. This chapter identifies three such challenges: (1) enforcing fiscal discipline; (2) addressing structural asymmetries between different euro area economies; and (3) preventing and countering asymmetric shocks. This chapter analyses the evolution of the EU’s multilevel system of fiscal and economic governance, and the way in which this system has sought to (partially) address these three main obstacles, from the original design of EMU, to the crisis and its aftermath. The chapter shows that there has been a clear evolution in the underlying principles of EMU, or the way in which fiscal and economic integration has been pursued since the creation of EMU to the present day.

Keywords:   fiscal discipline, moral hazard, market discipline, structural asymmetries, macroeconomic shocks, no-bailout clause, numerical fiscal rules, budgetary surveillance

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