Abstract
The picture presented about the European integration is that of a hybrid creation. In the words of Wolfgang Wessels (1997), ?it is a messy and ambiguous division of labour between national and EU levels.' The Economic and Monetary Union which is the most accomplished framework of European Integration, is no exception to this rule. Indeed, the policy mix that stems from its institutions is innovative in nature. Monetary policy is gaining momentum by seeking centralization at the supranational level and its decision making is governed by the European Central Bank. However, the Fiscal policies continue to remain in the realm of national states. This repartition of roles is meant to permit the monetary policy to respond to symmetric shocks (i.e. shocks faced by an overwhelming majority of the EMU, such as an oil shock which is a classic example) while the corresponding fiscal policies of the member states correlate themselves with asymmetric shocks. An example of an asymmetric shock is the shock that Finland endured during the 1990s. A common regulation has been adopted which initially aimed at ensuring that the ECB will not be put under pressure to monetize a country's debt. This regulation is a constraint as it provides no room for fiscal maneuver. The regulation is termed as ?The Stability and Growth Pact.' Although the regulation widely caters to stability and growth, its functions and subsequent assignments between the supranational and the national levels seem to help the regulation in acquiring a high amount of importance and recognition from a political point of view.
