The paper deals with the problems of coordination between monetary and fiscal policies in the Euro area. It examines how the existing institutions handle these problems and how the literature evaluates their working, deriving from these evaluations a proposal to reorganise them. The paper points out that there is a need for coordination between monetary and fiscal policies when both cyclical (short-run) and structural (long-run) problems are dealt with. Then it assesses how coordination is carried out under the existing institutional arrangements and identifies which parts of them, according to the existing literature, are in need of modification. Finally, on the basis of the content of this literature, it formulates a proposal to reform the institutional arrangements and the economic content of the Stability and Growth Pact, which aims at making them work effectively.
Jel Code: A10, E52, E61 H10, H39, H61, H63