FISCAL DISCIPLINE IN THE EMU

It is controversial whether a European monetary union strengthens or weakens member governments' incentives to adopt "reasonable" fiscal policies. But what is "fiscal discipline"? Can we specify a Community-wide fiscal policy? This report deals with the monetary union existence itself which causes compromise acceptance by national governments in setting their own fiscal policies. The report also talks about possibilities to specify certain fiscal discipline rules and the tools for this created. Fiscal policy discipline under the monetary union may require a member country to adopt a policy that is sub-optimal from its own viewpoint. It is very demanding to meet increased fiscal policy coordination and implement it in practise; however, it is inevitable to search for other possible alternatives that would preserve governments' decision independence in their own fiscal policies.