Will EMU survive 2010?

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Daniel Gros
17 January 2006

This 2006 Commentary by CEPS Director Daniel Gros predicted that slow growth would not be the only risk factor for EMU. In his view, the forthcoming challenge would come from intra-area divergences in growth among EMU member countries, which had previously remained rather limited and at a stable level. As a consequence, he speculated that the ‘one size fits all’ policy of the ECB would then likely become very difficult to bear for certain countries like Spain and Italy, which would enter a period of very low increases in, or even declining, domestic price levels. Finally, Gros foresaw that the combination of slow growth, rising real interest rates and increasing pressures from Brussels to reduce spending would make EMU unpopular in these countries.