Rethinking EMU Institutions

Building on widespread criticisms of current EMU institutional arrangements, we sketch a reform proposal for EMU macroeconomic institutions. We advocate the adoption of targets for both monetary and fiscal policies, to be integrated by a system of checks and balances. As for fiscal policy, expenditures, taxation and deficit targets will strengthen the governments commitment and, at the same time, facilitate "wellbehaved" stabilisation policies. Turning to monetary policy, inflation targeting, alongside with the assignment of ex-post assessing powers to the European Parliament and an internal reform of the ECB, will limit undue nationalistic influences within the ECB governing bodies.