Economic policy covers a wide range of actions undertaken by governments to manage their economy. These include monetary policy (money supply and demand), taxation, budget, job creation, etc.
Economic and Monetary Union (EMU) implies interdependence and the close coordination of EU countries' national economic policies. In the case of euro area countries, monetary policy falls within the remit of the European Central Bank. Non-euro area countries still manage their own monetary policy.
Although other economic policies remain the responsibility of EU countries' governments, for EMU to operate optimally, these must be closely coordinated.
Since 2008, in view of the difficulties the EU (particularly the euro area) had in dealing with the economic, financial and sovereign debt crisis, several reforms were made:
- The Stability and Growth Pact was strengthened by the Treaty on Stability, Coordination and Governance, which came into force in 2013. The ‘6-pack’ (6 laws) which reinforce the Stability and Growth Pact and macroeconomic oversight of EU countries was adopted, as were two further laws (‘2-pack’) that provide for additional coordination and monitoring in the euro area.
- An annual policy coordination framework, the European Semester, was created. This seeks to identify and address macroeconomic imbalances between EU countries, and to supervise budget policy. The Commission also analyses each EU country's structural reform policies, and then issues country-specific recommendations for action.
- The creation of an integrated banking union. This aims to align responsibility for supervision, resolution and funding at EU level and to ensure that euro area banks comply with uniform rules. Banks and their shareholders rather than taxpayers will be liable for eventual losses.