Policy-making in EMU: strategies, rules and discretion

Six years into the successful operation of European economic and monetary union (EMU), the conduct of the single monetary policy and of national economic policies and the interaction between them continue to be debated by both academics and policy-makers. This paper approaches the debate by assessing the role that strategies, rules and discretion play in the conduct of economic policies in the euro area. From this perspective, it discusses in particular the monetary policy strategy of the European Central Bank (ECB), the rules-based framework for national fiscal policies as laid down in the Stability and Growth Pact and the structural reform efforts under the umbrella of the Lisbon Strategy. It concludes that the current policy framework - with its combination of strategies, rules and constrained discretion - is well suited to deliver stability and growth in Europe, provided it is implemented effectively.