There is no labor movement across the EU, no federal budget, no political counterbalance to its infant Central Bank. And member countries are plagued by very high unemployment that has deep domestic structural roots. The most common argument is that the EU labor markets are not sufficiently flexible to accommodate asymmetric shocks that would affect one part of the union but not the rest. Many economists are concerned at the effect Emu will have on unemployment, as Emu will not only create price transparency but also wage transparency. It could thus bring higher unemployment and lower prices in the short term, and through its impact on core aspects of competitiveness, it may produce a long string of winners and losers.
Experts warn that the distribution of income is likely to widen.
Indeed, high unemployment affects most member states, although in some such as France and Spain it seems to be a perennial problem that a mere economic recovery has so far failed to resolve. As the Economist Intelligence Unit points out, the employment summit of the European Council in October showed that high unemployment can instill an element of political solidarity in the struggle for initiatives, at least in the short term. But unless the initiatives planned for at Luxembourg generate results, public confidence in the European Union could be eroded. Should a member country experienced a decline in exports or aggregate demand that would cause increase in unemployment, its economy would not be able to naturally adjust by allowing the currency to devaluate or use monetary policy to shift interest rates or exchange rates. Instead, it would require substantial transfers from the EU to countries experiencing unemployment, creating disagreement on taxes and transfers.