Guidance for economic and monetary reform

EU and euro-area policymakers are planning reforms to the common rules that underpin economic and monetary integration in Europe. To help, researchers in the EU-funded project ADEMU are developing proposals to guide the reforms.

Following the outbreak of the financial crisis and associated deep recession, the EU has been taking measures to improve its common framework for economic and fiscal policy coordination and supervision.

All 28 EU countries are part of this framework, known as Economic and Monetary Union (EMU), and 19 have taken a step to further integration through using the euro as a single currency.

Reforms to EMU are outlined in a roadmap developed by the presidents of five EU institutions – the European Commission, European Parliament, European Central Bank and European Council. The roadmap calls for further economic integration in two stages beginning in July 2015, with completion of the EMU by 2025 at the latest.

ADEMU was established to provide input to this reform process. It will prepare proposals on reducing economic vulnerability and improving the EMU’s sustainability.

The project’s researchers also plan to close the gap that they say exists between “policy-oriented analyses of the precise EU challenges, and the major developments in dynamic macroeconomic theory of the past three decades”.

Their research will involve analysis of the EU and euro area’s fiscal policies and the causes of sovereign debt crises. And they plan to develop both new indicators for assessing the risk of such crises occurring again, and new strategies for reducing these risks.

The research will also look at the way EU countries currently coordinate fiscal policies and will address such issues as debt overhang, fiscal consolidation, public debt management, risk-sharing and crisis management.