and some tentative conclusions about the future course of the economic policy debate in the european union. 1. there are important interfaces between monetary policy, fiscal policy and structural policy. problems concerning the composition of fiscal policy or the workings of the labour market affect the room to manoeuvre in monetary policy. this suggests that a vital dialogue will be needed between different parts of eu ’ s economic policy decision - making system that are involved in such matters. more of a joint appraisal will presumably emerge. new processes and institutions are also likely to develop. 2. the growing need for dialogue and a joint appraisal has already led to new tasks and developments for a number of eu institutions. many observers consider that this is true of ecofin, which as a leading actor in the construction of emu has responded to new requirements. one example of a completely new structure is euro 11, which is designed for the handling of joint issues by the euro area ’ s finance ministers. there are many other opportunities for dialogue, so those who fear that the ecb will be operating in something of a vacuum are likely to be mistaken. 3. issues concerning fiscal policies in eu / emu and labour markets have also arrived on the agenda in other ways, for example at the monetary committee. this is partly because many consider than monetary union has accentuated the need for a joint european discussion. with monetary union soon to be launched, moreover, the agenda has more room for other matters. the stability and growth pact is one example of earlier initiatives in connection with emu. various processes have likewise been started to bring the problem of unemployment into the limelight. 4. there are strong grounds, in the fields i have discussed, for keeping decisionmaking essentially at a national level. the effects of the policies, for instance in the labour market, mostly occur in the country in question. there are also considerable country differences in such matters as the premises for fiscal policy, the structure of government finances, labour market regulations and so on. still, the ongoing integration of markets, which monetary union may stimulate, is presumably exerting increased pressure for reform. the process that monetary union is now driving onwards is, in fact, fairly typical of eu cooperation in general. the european union is a highly decentralised organisation. power and political legitimacy are essentially located at the national level. the joint budget is limited. matters move forward in a process where external events, for instance in the global economy, and political initiatives modify the

the discussions that are now held on eu ’ s broad economic policy guidelines. in a way, it also contributed to the initiative from the german finance minister before the weekend at the beginning of may, when some further reinforcement of budget policy in the coming year was achieved by agreeing on an earlier implementation of the stability and growth pact ’ s objective and an earlier production of the annual convergence and stability programmes. this is ultimately a question for which each country is responsible. countries that fulfil the stability pact ’ s criteria will be entitled to a fiscal stance that is more expansionary than the ideal for european inflation. today, moreover, there is cause for concern that current fiscal policy may be too expansionary in some countries. but it is also clear that the costs of such a policy mainly fall on the countries themselves. higher domestic inflation eventually weakens competitiveness ; with exchange rates irrevocably fixed, once a cost crisis is there, it may be difficult to rectify. improved productivity can provide a remedy but achieving it is not easy. in practice, this presumably leaves either fiscal tightening at a later stage to retard the rate of wage increases or an adjustment of labour taxes, neither of which is simple. for the credibility of the emu project it is important that no country is already in such a situation at the start. countries with a risk of high inflation are therefore likely to experience strong pressure in various processes, for example in ecofin. on the whole, it seems to me that the question of adjusting fiscal policies to the ecb ’ s monetary policy will be a major issue. the same applies to how any fiscal adjustments are to be allocated across countries. labour market problems it is an established fact that the functioning of the labour market is a problem in many member states. a solution to the employment question clearly presupposes that the european labour market is made to work more smoothly than before. the matter is also directly connected with monetary union. there will no longer be any possibility of using a national monetary policy to deal with labour market shocks. it is then all the more important that the labour market functions properly. employment growth in the eu area has been weak and unemployment in many countries has been high for a long time compared, for instance, with the united states. labour force mobility is also lower than in the united states. but we also know that the member states differ considerably. some, such as the netherlands and the united kingdom, have been comparatively successful in generating new