Policy coordination in the euro area

The paper deals with the problems of coordination between monetary and fiscal policies in the Euro area. It examines how the existing institutions handle these problems and presents a proposal to re-organise them. The paper points out, contrary to what is often stated by the literature, that there is a need for coordination between monetary and fiscal policies when both cyclical (short-run) and structural (long-run) problems are dealt with. Then it assesses how coordination is carried out under the existing institutional arrangements, summarises the main literature that has dealt, in recent years, with the need to modify them and proposes a new scheme, which intends to make them work effectively.