Economic and monetary union: balancing credibility and legitimacy in an asymmetric policy-mix

Abstract

There is a double asymmetry in the structure of economic and monetary union (EMU). First, monetary policy is uniform while national economic policies are merely co-ordinated. The credibility of monetary policy is underwritten by an independent European Central Bank, but this is not suf cient as the objective of price stability depends on other aspects of economic policy. Thus greater coordination of national economic policies is needed to secure a credible monetary policy. This highlights the second asymmetry. The emphasis on credibility has been such that due regard has not been given to the legitimacy of the EMU policy architecture. If policy-making is to be effective, credible and legitimate, decisionmakers need to pay attention to four key legitimacy indicators: input, output, values and process. It seems inevitable that the success of the developing policy architecture and its effects, both in its monetary and economic dimension, will be judged against these broader standards.

A structural approach to politicisation in the Euro crisis

“…However, divergence in other fields of macroeconomic policy, originating in the different varieties of capitalism (VoC) of the Eurozone countries (Hall 2014), have persisted (Dyson 1994;De Grauwe 2009). Consequently, a technocratic, asymmetric institutional design was adopted, making monetary policy supranational and assigning fiscal policy to intergovernmental control and responsibility for economic policies to the national level, without a binding framework for coordination (Hodson and Maher 2002).…”

Power delegation and the European Central Bank's democratic deficit

“…Yet, in dismissing the status quo of the independent central banks in democracies on the whole, Buiter runs the risk of dichotomizing liberal and delegative democracies in a way that may unintentionally perpetuate a sort of neo-functionalism or intergovernmentalism centric analysis that he or other opponents attempt to criticize. Hodson and Maher (2002) question the legitimacy of the EMU and directly link it to the ECB. They insist that "a key requirement in representative democracy is that policy-makers enjoy legitimacy in the eyes of the general public" and this only occurs when the general public perceives (since actions reflect majoritarian preferences) that it is democratically accountable (Hodson and Maher 2002:399).…”

Ten years EMU: an assessment of ten critical claims

“…Yet, it did not envisage simultaneously the creation of a federal-like economic authority. This design of EMU, therefore, was 'asymmetrical' (Verdun, 1996(Verdun, , 2000; see also Hodson and Maher, 2002). On the one hand, monetary policy was to be transferred to a central, supranational body, whereas, on the other hand, no supranational economic authority was to be introduced to have the same mandate and powers as the ECB.…”