Thus, EMU is to be seen primarily as one aspect of a larger, political project. Most analyses, however, have tended to concentrate on the union’s pros and cons in an economic context. The advantages that have been cited for the participating countries include lower transaction costs for trading in a common currency, increased transparency and competition in the single market, and low, stable inflation. The lack of an exchange rate as an instrument for stabilisation policy is mentioned as one of the drawbacks. Sweden’s Parliament decided in December 1997 that Sweden would not be joining the monetary union from the start, mainly on account of the lack of public support. The BIS Review 68/1998  -2-  decision was made after a committee of experts had reported on participation’s advantages and drawbacks for Sweden. The commission was basically in favour of Sweden being a member of EMU but was of the opinion that, given the disadvantages considered, Sweden should not participate from the start. The costs in terms of stabilisation policy were assumed to exceed the benefits from economic efficiency. The report’s assessment of political aspects favoured Swedish membership of EMU. The report gave the Riksbank an occasion to present its appraisal of the monetary union. This differed and amounted to a recommendation that Sweden should participate from the start. We considered that the commission had overestimated the costs for stabilisation policy, while the economic and political benefits were likely to be even greater than envisaged in the report.
The members of the Council are jointly responsible for making the ECB a success and establishing price stability in the euro area. In this sense they are all in the same boat and nothing is more likely to capsize the boat that a national preference. That, I believe, will characterise what happens in practice. In any event, a distinct, transparent policy right from the start is vital in order to avoid unnecessary uncertainty that could result in exaggerated movements in exchange rates and interest rates. Other components of economic policy  BIS Review 68/1998  -4-  In the long term it is the construction of monetary policy that determines the rate of inflation. In the shorter run, however, price movements are also influenced by other economic factors. Other components of economic policy - that is, fiscal, labour-market and structural policies - therefore have to be constructed so that they support the policy drive for sustainable price stability. If these components do not work, the burden on monetary policy becomes additionally heavy. Economic policy apart from monetary policy will continue to be a national matter in the euro area, even though it is the subject of agreements at Community level. Fiscal policy will still be constructed by the national governments, though to some extent its scope is restricted by the Stability and Growth Pact, to which all the EU countries subscribe. This Pact requires each country to conduct a responsible fiscal policy, defined as achieving a general government budgetary balance or surplus over the medium term.