Otmar Issing once coined that quite succinctly - “one size must fit all!” The member states had to accept that fact when they joined the third stage of European economic and monetary union. If persistent diverging trends emerge, either they have to be accepted, or, if detrimental economic consequences result, measures need to be taken at the national level.
However, interest rate differentials also reflect the adjustment of the real exchange rate. But I do not want to elaborate much on inflation differentials. This issue will be covered in depth in tomorrow’s policy lecture by my colleague, Hermann Remsperger. 3. Policy coordination and Stability and Growth Pact  The asymmetry of political responsibilities in EMU makes a comprehensive system of coordination procedures indispensable.