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.
I believe this is undisputed. The rationale arises from the need to take account of the spill-over effects from national economic policies. Consequently, the EC-Treaty obliges member states to consider national economic policies “as a matter of common concern” and subject them to multilateral procedures. Of all the coordination mechanisms, name recognition is highest for the Stability and Growth Pact.