Hard and soft economic policy coordination under EMU: problems, paradoxes and prospects

Although the launch of the euro went better than many expected, sluggish growth, persistent unemployment and growing disenchantment with key elements of the economic governance system have led to demands for change, especially in policy coordination. This paper examines the criticisms of economic policy in the EU and the mechanisms through which it is coordinated, and considers how the EMU policy system might be reformed. It points to problems and paradoxes in the way economic governance operates, notably those surrounding its ability to deliver a coherent policy mix that brings together monetary fiscal and supply-side policies. The paper concludes with a discussion of whether gouvernment économique might offer a way forward. * This article draws on a research project generously funded by the British Economic and Social Research Council and the ‘Govecor’ project funded by DG Research of the European Commission (www.govecor.org).