An External Stability Pact for Europe
Given the increasingly close financial and economic links between euro-zone members, rising government debt in even one EMU country can have serious consequences for all members, because no member will let another default. Therefore, private-sector debt should also be monitored within the EMU’s surveillance framework.
BERLIN – The current economic crisis has exposed two fundamental problems in the design of the European Monetary Union. The first concerns the sustainability of public finances in a number of euro-zone member states. Second, inadequate macroeconomic policy coordination has resulted in divergences in the international competitiveness of euro-zone members, threatening the very existence of the euro.