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In the backdrop of the country experience, this chapter identifies the broad nature of the euro area crisis. While discussing some characteristics of the crisis countries in the euro area, it probes into the issue of how far it is an ‘optimum currency area’. The chapter argues that the seeds of the crisis were perhaps sown in the very nature of the euro area. Also, since euro area brought together dissimilar economies in a currency union, the members lost the flexibility of using currency depreciation in the event of asymmetric shocks affecting some of them. The chapter also looks into some details of the euro area rescue package that has been put together. The chapter notes that if the monetary union is to survive then fiscal union would be inescapable, which, however, might not be feasible without political union.

‘Economic and Monetary Union: Evolution and Conflict’ provides a critical account of the evolution of the European Union’s Economic and Monetary Union (EMU), with a special focus on changes and reforms adopted since the euro area crisis. The chapter provides an overview and analysis of, first, the history and principles underlying the original EMU; second, the most important reforms adopted in order to address the euro area sovereign debt crisis; and third, the ongoing questions in the debate. The chapter will conclude by discussing the ways in which the basic principles and assumptions underlying the original EMU have had to evolve, and the fundamental disagreements that underpin the current debate on the future of EMU.

Apart from giving a sense of the theme of the book, this chapter gives summaries of each chapter of the book. In the backdrop of the global financial crisis which turned into the great recession and subsequently to the euro area crisis, it describes the observed linkages between finance and fiscal issues with several illustrations and anecdotal evidence. It attempts to explore emerging issues in the policies relating to management of public debt, central banking, taxation, and regulation of financial sector. In view of their contemporary relevance, particularly in the euro area, issues relating to sovereign debt restructuring and sub-national finance arising from the crisis are also discussed. In brief, the book argues that an important lesson for public policy is that sound fiscal management is at the heart of maintaining financial stability consistent with growth.

This chapter provides a brief account of the events leading up to, and the unfolding of, the euro area crisis. It further addresses the relationship between the crisis and the original design of EMU, discussed in the previous chapter.

This chapter examines the individual innovative roles of the architects of European monetary union as constrained policy-makers. They worked within the confines of their political mandates from heads of state and government. They were also embedded not just in prevailing economic ideas but also in ideas about political legitimacy and the proper location of sovereignty. The chapter assesses their contributions and legacies from the vantage point of key academic debates. Particular attention is paid to optimum currency area (OCA) theory; to debt restructuring and to wages and competitiveness; to European banking union and fiscal union; and to the problems of technocracy, democratic deficit, and political legitimacy in EMU governance structures. The chapter identifies the problems in assessing the significance of an architect. It closes by reflecting on their value within later debates about the future of EMU..

This monograph has provided a critical analysis of the past, present, and possible futures of fiscal and economic integration in the European Union. It has argued that the crisis and its aftermath have changed EMU in extremely significant ways, and have had an enormous impact on the constitutional system of the EU and its Member States. Finally, the monograph has also analysed the constitutional obstacles to further integration in this area, and possible ways forward. These concluding remarks highlight the insights gleaned from each chapter and certain common threads in this study, such as the limited nature of EU competence, the evolving nature of EMU, and the consequences of this evolution as regards democratic legitimacy.

This book focuses on the euro area crisis and its aftermath from a constitutional perspective. It provides a critical analysis of the workings and evolution of Economic and Monetary Union, the changes brought by the crisis and their broader effects, and the constitutional obstacles to integration in this area. This introduction provides a brief overview of the structure and contents of the book.

This chapter presents an overview of the state of the Indian macroeconomy (with an emphasis on the fisc) and its relationship with the global crisis so that the monetary and fiscal stimulus can be placed in the larger context of fiscal consolidation. While discussing the transmission of the global financial crisis to India, the chapter notes that given the trade linkages between euro area and India, any recession in Europe will affect Indian export growth. As far as Indian fiscal trends are concerned, it has been noted that following the enactment of the fiscal responsibility and budget management legislations (both at the central and states level), India commenced a strategy of fiscal consolidation quite effectively. Such efforts got a jolt with the advent of the great recession. Nevertheless, the hard-earned fiscal space provided India the opportunity to undertake a fiscal stimulus.

This chapter provides an overview of the original design of Economic and Monetary Union (EMU) and its flaws. It highlights the underlying tension within EMU between a centralized monetary policy, on the one hand, and essentially decentralized economic and fiscal policy, on the other. Ultimately, this asymmetric design of EMU proved to have certain flaws that contributed to the euro area government debt crisis and that have made it more difficult to address said crisis.