Conference Paper

Recent developments in the European Union in the field of economic policy show the need for redefinition of certain aspects of the common activities. The consequences of uncoordinated government spending and fiscal and monetary activities in the member states are evident. It led to large budget deficits in some member states which have caused a range of threats to their macroeconomic stability and to the overall macroeconomic stability of the entire Union. This requires urgent harmonization of the national economic policies if further endangering of the value of the common currency, the euro, is to be avoided. The European Council meeting, in December 2011 and in March 2011, recognized the deterioration of the economic and the financial situation in the EU and called for full implementation of the European Union’s New Economic Governance; aiming for further confidence in the European economy. The reforms of the EU institutions are expected to yield stronger competencies to influence the implementation of common policies and legislation. The main aim of this paper is to put in the limelight the needs for reforms of the EU institutions towards a higher coherence of the common policy, and to offer recommendations for further actions. The Republic of Macedonia, as a state with aspirations for full membership in the EU, has to continually and carefully follow the developments in the area of the prospective reforms of the EU, and whenever it is viable to meet the relevant national targets for the government spending, the public sector and the overall national debt. We surveyed the history of the EU, as well as other monetary unions such as that of the USA, and it seems that both suffer certain volatility. However, it also seems that more recent and/or less economically integrated monetary unions are more prone to it.