ABSTRACT
This chapter deals with the problems within the Euro system. It interprets the connections between legal rules and economic facts both at an institutional level and in relation to the functioning of the Single Market. The chapter argues that member states in conditions of financial instability and budget deficit – at least within Eurozone – have lost any power to combat regressive social policy as 'suggested' by European institutions. In order to manage national government deficits and debt and promote financial stability, member states can only use traditional counter-cyclical policies to alter revenues and expenditures, including welfare spending. Labour mobility and wage flexibility within Common Labour and Goods Markets are now becoming the crux of the matter for European economic policies, reallocating financial balance targets among member states. Within a monetary area where member states have very different financial market structures and values, this produces significant asymmetries between common European monetary policies and national economic and fiscal policies.
