Part 1: Monetary and fiscal policy in the European Union

What are the consequences of the policy response to the crisis?

The course starts with an introduction to the US and EU impact of the Great Financial Recession and the main macro policy reactions.

Which are the policy options to smooth the business cycle after the Great Recession in the Eurozone?

Monetary policy in the EMU: The Commission’s view?

The theoretical models: Mundell I and Mundell II. Panic driven austerity: the ECB versus the FED: What have we learnt about Monetary Integration? Case Study Spain.

Which are the limitation of the economic policy under single monetary policy and the Growth and Stability Pact?

Are the automatic stabilizers enough?

The students will debate in the practical sessions about the eurozone response to the recession and Europe’s output crisis: Will the fiscal compact help or hinder? Social collateral damages?

The monetary policy debate in the eurozone: The Fleming-Corden theory of the OCAs and the EMU. One size fits all? Are efficient the not-conventional monetary policy instruments?

The critical current view of Degrauwe point of view is introduced trough his papers of 2006 What Have we Learnt about Monetary Integration since the Maastricht Treaty? JCMS 2006 Volume 44. Number 4. pp. 711–30 and PAUL DE GRAUWE AND YUEMEI JI, Social Europe Journal 25/02/2013 Panic-driven Austerity In The Eurozone And Its Implications, which present critical views about the EMU policy in recent times.

In 2016 the Commission think thank recononize, eigh years later, that "reducing unemployment, strengthening the euro area’s growth prospects and ensuring the future resilience of the European economy require better tailored fiscal tools at euro area level. Today, the limits of the EU’s fiscal framework mean that the euro area has had to rely excessively on the monetary policy of the European Central Bank (ECB) to ensure macroeconomic stability. As these monetary policy tools are increasingly stretched, calls for a more balanced policy mix that includes more supportive fiscal policies have been voiced by the EU – including by Commission President Jean-Claude Juncker in his 2016 State of the Union ‘Letter of Intent’1 and by ECB President Mario Draghi – as well as by a very broad set of stakeholders, from international organisations to academics. Against this backdrop, the Commission presented on 16 November a Communication ‘Towards a Positive Fiscal Stance for the Euro Area’"