In the European monetary union, however, fiscal discipline is absolutely essential.The set-up of the monetary union can further compound the tendency of governments to finance their spending through debt, as the consequences of bad policy choices can more easily be externalised to neighbouring countries.
4 Monetary policy and heterogeneity Ladies and gentlemen When comparing US and European monetary policy, the institutional set-up is not the only difference that springs to mind. In the euro area, monetary policy is complicated by a higher degree of heterogeneity compared to the US.