The Governance of Macroeconomic Imbalances in the Euro Area

This paper will analyse the dilemmas faced by policymakers in governing macroeconomic imbalances in the euro area. The euro crisis can be characterized as the fast unwinding of imbalances that had built up in the years before. In order to address the build-up of unsustainable macroeconomic imbalances that could potentially spiral out of control during a crisis phase, the EU designed the Macroeconomic Imbalance Procedure (MIP). But whereas direct EU intervention can be seen as justified during a crisis, addressing slow-burning imbalances is of a fundamentally different nature. On the basis of empirical assessment of its implementation in a variety of cases, including 75 in-depth interviews, this paper will analyze the development of the MIP over time. It will also seek to explain why it has left some of its champions disappointed. The policies that are supposed to address imbalances go to the heart of national democracies so that EU interference cannot be overly coercive or prescriptive. The MIP is not without its added value, but this lies in non-hierarchical features, such as demanding position-taking by various actors and persuasive power.