300 Intereconomics, November/December 2002
conomic and monetary union (EMU) is of poten-
tially fundamental importance to cohesion. On the
one hand, the adoption of the single currency and of
the new macroeconomic policy regime affects the
socio-economic performance of euro area member
states, their regions and peoples. On the other, EMU
is likely to affect the perception of cohesion, not only
by making cross border comparisons easier, but also
by influencing expectations of what inequalities are
The EU has directly and indirectly acquired consid-
erable responsibility for economic policy in EMU, and
the continued political support for this arrangement
will be dependent upon its success. Our approach is
to treat political support for, and wider social impacts
of, EMU largely as repercussions from the evolution of
socio-economic cohesion, and to review only
research on the latter in any detail. This focus seems
to be justified given that EMU was designed as an
economic means to a political end.
The effects of EMU on cohesion will be analysed
over varying time horizons:
• Short-term acclimatisation requires member states
to adopt the new policy framework and cope with a
new pattern of asymmetric shocks. This process of
acclimatisation has been ongoing since the
Maastricht Treaty stipulated nominal convergence
as a prerequisite for entry into EMU. Thus, we can
draw on evidence of the effects of the convergence
process for the Cohesion countries (Greece,
Ireland, Portugal, Spain) over the 1990s.
• Medium-term adjustment is characterised by the
impact of greater macroeconomic stability and
more openness on growth. The analysis will in
particular look at the evolving synchronisation of
business cycles and the adjustment capacity of
commodity and labour markets.
• Long-term restructuring will imply a re-location of
industries and potential effects on innovation and
technologies used in Cohesion countries.
Obviously, here research mostly does not deal with
EMU and cohesion directly, so that our inferences
are somewhat speculative.
Brian Ardy*, Iain Begg**,Waltraud Schelkle*** and Francisco Torres****
How Will EMU Affect Cohesion?
The new policy environment of EMU affects economic, political and social cohesion
in different ways: the policy mix and menu will be reconfigured; it will provide for more
macroeconomic stability in cohesion countries; economic competition will intensify and
change patterns of specialisation; and comparison of living standards will become easier,
which puts pressure on policymakers to reduce inequalities. This article assesses the
significance of these effects and their likely consequences in the short, medium and long
run. Then the salient cohesion issues as regards eastern enlargement are discussed.
Finally, policy conclusions are drawn, mindful of the considerable uncertainties that
warrant further research.
* Research Fellow at the European Institute, South Bank University,
London, and Visiting Lecturer at the University of Reading, UK.
** Professor of International Economics at South Bank University,
London, and joint editor of the Journal of Common Market Studies.
He has just moved to the European Institute of the London School of
Economics and Political Science, UK.
*** Adjunct Professor of Economics at the Free University of Berlin,
Germany, and Lecturer of Political Economy at the European Institute
of the London School of Economics and Political Science, UK.
**** Professor and Head of Research at the Institute for European
Studies of the Portuguese Catholic University, Lisbon, and Senior
Economist at the Bank of Portugal. He is also Visiting Associate
Professor at the University of Aveiro, Portugal.
The authors gratefully acknowledge research funding by the
European Commission as an accompanying measure under the
“Improving Human Research Potential and the Socio-Economic
Base” programme for a larger study on this topic, forthcoming in
B. Ardy, I. Begg, W. Schelkle, F. Torres: EMU and
Cohesion: Theory and Policy, Cascais 2002, Principia, of which this
article is an outgrowth.