Fiscal Policy Without A State In Emu

This book examines fiscal policy coordination in EMU and the required adjustments to national fiscal policies by EMU member states. The book shows that, in the process of Europeanization, national interests have had a major impact on the formation of fiscal policy coordination.

Essay from the year 2006 in the subject Business economics - Economic Policy, grade: 1,5, V xj University, course: Independent Project, 31 entries in the bibliography, language: English, abstract: I choose the topic "The Swedish Fiscal policy 1999-2004 compared with the EMU states." Because I want to find out whether the Swedish fiscal policy was counter-cycle compared to the EMU states1 or not. The EMU states have the Stability and Growth Pact (SGP) which set rules for their fiscal policies the pact was introduced in 1999 with the start of the EURO in 1999 began a change and the last actual data I found was 2004 that's why I choose this period. Among other things I want to figure out if the SGP has a negative effect on the fiscal policy in a recession. I start the paper with presenting the so called "Swedish Model" and the changes and development of the 1990s. Then I will present the Institutional framework in Sweden and the Budget process. After this I will present a definition of fiscal policy and start with the examination of the Swedish fiscal policy 1999-2004 present the methods I use and analysis the period. Then I compare the Swedish development with the EMU states and try to find out if the SGP has a pro-cyclical effect on the fiscal policy this would mean for example in a recession that the downtown takes longer and the economic fluctuation is stronger than without the SGP. In the end I present my conclusion and have a brief discussion. In this paper I will not cover aspects of tax development, labour market and monetary policies because of the lack of space.

EMU started with eleven member countries as scheduled on January 1, 1999. The paper shows that the primacy of politics over economics in this decision could have serious consequences concerning the stability of EMU in the transition phase. Speculative attacks against currencies which are in economic distress due to asymmetric shocks can still happen. A speculative attack as such cannot force a country out of EMU. However, the country concerned might voluntarily decide to leave the system as the costs of staying inside EMU, e.g., due to further rising unemployment, become too large to bear.

With the advent of the third and final phase of European and Monetary Union (EMU), the debate over European monetary unification is at the top of the political and economic agenda. Much has been written over the past five years about whether EMU is justified given the various expected benefitsand prospective costs, but there has been little detailed material on how EMU will work and what the practical implications of it will be for Europe as a whole. Economic Policy in EMU is a comprehensive look at the mechanisms involved, likely effects on monetary and budgetary policy, and the ways in which monetary union will deal with and affect business cycles and regional differences. It combines rigorous analysis of how the European economy works withan insider view of how this will change after 1999: as such, it is vital reading for all involved in the most important topic facing Europe today.

This paper examines the interest spending and taxation channels through which EMU could affect the public finances. It provides a framework for examining different views on a further narrowing of interest rate differentials. A model of Blanchard and Fischer is amended to analyze the two channels, and empirical evidence on the tax harmonization process is presented. The paper argues that “high-debt” and “high-tax” countries pursuing prudent fiscal policies could benefit the most from EMU: if monetary and widespread fiscal discipline are jointly established, interest rates could decline rapidly, while tax harmonization is likely to be gradual.

Leading scholars and policy makers examine the challenges that are facing economic policies in the EMU today.

The Stability and Growth Pact (SGP) encompasses the legislative text and political resolutions regulating fiscal policy and public finances in EMU. The contributions in this volume analyse the institutional, legal, theoretical and empirical aspects of the SGP, examine its development and evaluate its main implications. The authors include academic economists, who provide insightful analysis, and policy makers who have contributed to the shaping of the pact and have a direct responsibility for its implementation. This book is the definitive source of reference on the SGP for academics, policy makes and economists.