The Lessons of the Crisis for EU Policy Making

The article details the dominant narrative on the EMU crisis, the so-called "Berlin View", centered around the macroeconomic Consensus that emerged in the 1990s. This Consensus rules out discretionary policy (in particular fiscal policy) as a tool for policy makers, that should let market adjustments take care of macroeconomic shocks. The Consensus not only shaped the response to the crisis, but it is also the foundation of the Maastricht institutions (ECB mandate and fiscal rule). The article contrasts this narrative with a more structural one, highlighting the non-optimality of the EMU. If this second narrative were correct, much more than austerity and fiscal consolidation were needed. Institutions mimicking the functioning of a federal state would be needed to avoid divergence and further crises.