The ECB’s Role in Shaping the Future of EMU Policy Coordination

- "The Euro-zone crisis has illustrated that the existing policy coordination framework is insufficient."
- "We argue that, short of fiscal federalism, the ECB needs to play a greater role in enforcing policy rules."
- "We propose a simple system that would enable the ECB to adjust its haircuts on sovereign securities depending on the size of emerging imbalances."
- "Had such a system been in place, it would have raised funding costs and triggered warning signs for the crisis countries as early as in 2004, which could have led to earlier—and hence less severe—policy adjustment."

GoldmanSachs Global Economics Paper 20100831

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