ABSTRACT
This chapter begins with a retrospective of the construction and regulation of the euro area through rules. The euro area was conceived as EMU1 (European Monetary Union Phase 1) without applying the regulations of an optimal monetary zone. This was unprecedented.
We shall show the reasons for this exceptionality: political ideas and culture, pre-scientific meta-beliefs and rules were interconnected to inform and guide economic policies. We will show that the European Commission’s supervision of national budgets has been unrealistic since 1999 for several reasons: non-obedience of the treaties and rules of the policy-mix theory; no reference, initially, to the concept of structural deficit; increasingly complicated rules and irruption of financial crisis circumstances. The latest regulatory advance – the European semester itself – is not exempt from flaws of implementation. The three procedures currently in use – budgetary supervision, macroeconomic imbalances procedure and coordination of economic policies – are reviewed and discussed (the legal character of unequal binding, efficacy). The combination of these three procedures is not an optimal one, and there is a-symmetricity in the country-specific recommendations (unequal treatment of the external surplus and of the public budget deficit).
All of these elements make it possible to conclude that it is still in 2018 essential to innovate: either by requiring each member state to behave as if it were an actor in this European stabilization function (European semester procedure), or by introducing an actor or more actors (such as the European monetary fund or a European treasury or a stabilization mechanism in the European budget) which would assume the crucial function of overall macroeconomic stabilization.
