Adjusting to EMU:The Impact of the European Economic and Monetary Union on domestic fiscal and wage-setting institutions in the Member States

The dissertation shows that the start of EMU has resulted in institutional changes in the areas of fiscal policy-making and wage-setting in the Member States of the euro area. It argues that these changes were triggered by two factors: (i) in EMU, monetary policy can no longer be used as an instrument for output stabilisation; (ii) the one size fits all monetary policy of the ECB potentially destabilises output in those Member States whose economic data diverge from the euro area average. Assuming that Member States seek to use fiscal policy or wage-setting in order to re-stabilise output, the theoretical part of the dissertation investigates the economic and political contexts in which the two instruments can be used as cyclical stabilisers and specifies the institutional pre-conditions for successful stabilisation. In a comparative part, the dissertation quantitatively assesses the interplay of monetary policy, fiscal policy and wage-setting in 10 euro area Member States over the pre-EMU era ( status quo ante ), arguing that the impact of the loss of monetary policy is higher in those countries that had relied on monetary policy as a cyclical stabiliser or those that had already encountered difficulties in stabilising output before EMU. The analysis then extrapolates potential problem-pressures resulting from the ECB monetary policy for each Member State and investigates whether the appropriate set of institutions to deal with this pressure had existed before EMU or whether institutional change could be expected as a reaction to it.In a qualitative part, institutional changes that have taken place in 10 Member States since the start of EMU are assessed ( status quo post ) and compared to the theoretical expectations. The dissertation concludes that the asymmetric pattern of institutional adjustment in fiscal policy institutions and wage-setting institutions closely follows the approach presented in the theoretical part of the dissertation