Some proposals for a democratic and progressive EMU

Abstract

The paper deals first with the asymmetries existing in the European Monetary Union (EMU) between the peripheral countries and core countries. Macroeconomic imbalances in terms of public budget and current account descended from these asymmetries and from the EMU institutional set-up. The paper also investigates the theoretical inspirations – based on monetarist and rational expectations theories - and the country and sectional interests underlying this set-up. Theoretical progress has however intervened in the last couple of decades that makes this set up obsolete. The need for new institutions then arises, even if their realization is contrasted especially by core countries. After designing the desirable goals of a new Monetary Union, the paper indicates the need for a more democratic Union and a possible articulation of new common institutions. The possibility of a country’s exit from the Union and the costs and benefits related to this process are also discussed. Even if net costs might derive in the short run, the threat of exit can add to its bargaining power subject to the hegemony of core countries.