The paper distinguishes between the impact of the EMU on nominal wage flexibility and on equilibrium real wage and unemployment levels. A perceived need to increase nominal wage flexibility as a substitute for domestic monetary policy and a tendency to less real wage moderation in the EMU are likely to promote informal bargaining co-ordination and social pacts in the medium run. But such co-ordination is not likely to be sustainable in the long run, as it conflicts with other forces working in

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... he direction of decentralization and deunionisation. This could lead to more government intervention in wage setting during a transitional period. Although monetary unification will strengthen the incentives for higher-level transnational co-ordination of wage bargaining, such a development is improbable in view of the co-ordination costs involved. If transnational co-ordination develops, it is most likely to occur within multinational firms.