Droit et Économie - L'avenir de l'Union économique et monétaire : une perspective franco-allemande - 126

126 L'AVENIR DE L'UNION ÉCONOMIQUE ET MONÉTAIRE

based on peer review and open method of coordination that has almost entirely relied on the often-deficient political commitment of Member States to
comply with the basic budgetary rule stated in primary Union law.65 While
the reform measures described in the previous section have resulted in a
substantive and procedural reinforcement of the existing framework, it has
yet to be seen whether this will result in a fundamentally different assessment
in the medium- to long-term.
For the time being, the EMU legal framework has not provided the necessary incentives or indeed instruments to achieve real convergence of the
euro area countries.66 Yet, convergence is considered to be a prerequisite
for well-functioning single currency area, because as Franks et al. observe:
'if business cycles are not synchronized, the optimal monetary policy will
diverge across countries, making countries worse off with a common monetary policy than outside the monetary union', whereby 'idiosyncratic business cycles leave a tough burden for national fiscal policy to offset asymmetric shocks.'67 With regard to the latter point, apart from the lack of a
supranational competence in the sphere of economic policy to effectively
overcome structural economic differences between Member States and
deviating economic policies, there has also not been any meaningful European fiscal capacity to address asymmetric shocks. Put differently, the loss by
the euro area Member States of monetary policy and exchange rate instruments to react to such shocks has not been compensated by adequate
mechanisms at the supranational level.
At the outset of the European financial and sovereign debt crisis this has
arguably put the European monetary policy authority between a rock and
a hard place, having to engage in what Praet has referred to as a 'delicate
balancing act' between 'On the one hand, the risks to price stability emanating from a possible financial meltdown call' and, on the other hand, the
danger that 'monetary policy may end up being subject to a short-term bias'
and ultimately 'a regime of "financial dominance"'68 From a legal perspective this balancing act emanating from the principle of conferral provided
65. AMTENBRINK F. and DE HAAN J., 'Economic governance in the European Union - Fiscal policy
discipline versus flexibility', (2003) CML Rev., 1075-1106.
66. FRANKS J. R. et. al., 'Economic Convergence in the Euro Area: Coming Together or Drifting
Apart?', IMF Working Paper No. 18/10. Available at (accessed 20 February 2018).
67. Ibid., at 7. See also FERRINO F. and KLAUS B., 'Euro area business cycles in turbulent times:
convergence or decoupling?' ECB Working Paper Series No. 1819 / June 2015. Available at
(accessed 20 February 2018).
68. PRAET P., 'Managing financial crises: the role of the ECB', Speech held at the 40th Economics Conference of the Österreichische Nationalbank, Vienna, 10 May 2012. Available at

https://www.imf.org/en/Publications/ https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1819.en.pdf?8aacf9b049f3a7e6360b69

Droit et Économie - L'avenir de l'Union économique et monétaire : une perspective franco-allemande

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