This paper discusses the need for macroeconomic policy coordination in the E(M)U. Coordination of national policies with cross-border effects does not exist at the macroeconomic level, although requested by the EU Treaty. The need for coordination stems from current account imbalances, which origin in market-induced capital flows, destabilizing the real exchange rates between low and high wage countries. The recent attempts of the Commission and the European Council to reform E(M)U governance

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... not address this problem and thus remain incapable to protect against future instability. Macroeconomic coordination needs (i) a clear identification of union-wide employment goals, and (ii) the establishment of a high level institution responsible for coordination following these objectives. The paper proposes a High Representative for Economic Policy, equipped with an appropriate office and supported by a Council of Economic Advisers committed to the union-wide objectives.