ABSTRACT
This chapter provides an overview of the theory underlying economic integration with special emphasis on a monetary union as an optimal currency area. It describes the scope of the economic union within the Economic and Monetary Union (EMU), and brings out the evolution of economic policy coordination in the EU. The chapter outlines the perspectives of economic integration in the EU, including the prospects of a further euro zone enlargement towards the EU members from Central and Eastern Europe. The creation of the European Financial Stability Facility and the European Stability Mechanism led to implicit suspension of the no-bailout clause, replacing it with a formal – although not directly embedded in the Treaty on the Functioning of the European Union (TFEU) – policy of conditional bailout. In accordance with Art. 121 TFEU, the basic tools for economic policy coordination are the broad economic policy guidelines (BEPG) – non-binding recommendations to the Member States adopted by the Council of the EU.
