The implications of the European Monetary Union for regional
development: rejoinder to the comments by Ron Boschma
Boschma had some comments on the writer’s first paper (see previous texts, from Begg & Hodson and from Boschma), but the writer doesn’t agree with Boschma. According to the writer, Boschma’s comments focus on too narrow a conception of EMU.
Under any currency arrangement, there must be a ‘one-size-fits-all’ monetary policy. As Boschma says, different regions (prosperous or poor) will have different preferences. That is true, but according to the writer, EMU is more than the ‘somewhat technical matter of formal integration of currencies and monetary policy’. EMU entails a significant regime change in the field of economic policy (it affects fiscal policy, and puts pressure on the labour market to play a greater role in the adjustment process).
Where the writer differs from Boschma is in believing that the process
of economic integration will have an effect not only on regional prospects, but
also on the efficacy of different levers (‘hefbomen’)
of policy. For the least competitive regions (with undiversified economies),
the risks of shocks are amplified (versterkt)
by economic integration and may be affected by currency union. But it is ‘in
relation to the E in EMU, possibly more so than the M that the effects may be
most pronounced’.
One of the writer’s aims in the first paper was to dispute the
presumption that territorial units that are ‘countries’ prior to monetary union
subsequently become ‘regions’. Therefore he was making the point that there is
a hierarchy of power and responsibilities. Supranational level becomes dominant
in macro-economic policy, rather than the national level, while the national
and sub-national levels have to reconfigure their other policies. Boschma down
plays the constraints of the ‘Stability and Growth Pact’. He says that the pact
is only likely to be a problem for those member states that have an excessive
budget deficit (near 3% of GDP). The writer finds that a rather simplified
interpretation; Member States are required, under the terms of their respective
Stability Programmes to aim for balanced budgets in the medium term, but few
Member States have achieved this target with any consisitency.
Furthermore, the writer thinks that the bulk of adjustment competence
is at the national level (instead of regional level); regions can not go alone
when it comes to adjustment. Policies have to work together rather than be
compartmentalised. Regions do play a vital role, but the contribution of
regions can only be understood by looking at the policy system as a whole.
The writer does not share Boschma’s view that the advent of EMU does
not change much. The shift of responsibility from Member States to the EU level
recasts the policy framework and alter the demands of different policy
instruments. The issue of regional adjustment is one that the architects of EMU
have to confront sooner rather than later.