The Economic and Monetary Union (EMU) and global macroeconomic imbalances
This chapter provides an overview of the crisis and reform of the Economic and Monetary Union (EMU) from the perspective of external imbalances. The paper explains what steps and measures made the eurozone recovery possible and why there is still need for a fiscal capacity with a stabilisation function. The year 2012 is seen as a turning point, when the monolithic focus on fiscal discipline and cost competitiveness was replaced by the need for a systemic reform of the EMU. However, this has not altered the fundamental direction of adjustment which brought the euro area to an unprecedented current account surplus. The chapter also discusses the dynamics of the EMU debate following the rise of President Macron in France and the extension of the Grand Coalition in Germany. The chapter draws conclusions regarding the unifying role of the single currency as well. This unification is being made complicated by the divergence of thoughts between the key founding states of the EU, France and Germany, and more importantly, by the crisis-time divergence between euro area North and South and the lack of sufficient convergence between East and West. Since there is no consensus among experts or policymakers about the nature and the solution of the eurozone crisis, the authors also explain the role of competing paradigms in this area, and warn against the risks of ‘renationalisation’.