The result is greater transparency and stronger price competition. Price differences in Europe today are twice as large as in the United States. The price of a small car, for example, can vary more than 50% between EU member states. Risk of countries getting out of step However, the road to greater cohesion is not necessarily smooth. In a monetary union, forces are at work that may cause member states to develop in different directions instead of converging. Discussions about EMU often raise the topic of asymmetric shocks, a technical term that stands for something quite simple. The conditions for the countries involved differ initially as regards their economic structures, for example the corporate sector, the level of technical development, wage bargaining systems and competitive pressure. Economic shocks will therefore affect them differently. Problems may also arise if economic policy in one country is markedly different from the general direction. In Sweden, for example, the economic differences from the EU countries in the 1970s and 1980s were in large measure a consequence of self-imposed stabilisation problems. If a shock does hit a single country, a monetary union eliminates the possibility of mitigating its effects by adjusting the exchange rate. Neither can this be done by implementing a national interest rate policy. Instead, wages and prices need to be as flexible as possible so they adjust and counter the impact of the shock.
But an intense dialogue has now started on structural issues at extraordinary Council meetings, such the coming meeting in Stockholm, as well as in more regular processes such as the Luxembourg process for better employment policies and the Cardiff process for more efficient product markets. The EMU to date It must then be asked, of course, how well this framework is working now that EMU is a reality. It is certainly too early to draw definite conclusions about these matters but I can offer some observations. The first point worth noting is that we are now reaping the benefits of the convergence process and of the consensus on stabilisation policy that has, in fact, been established. Europe is now experiencing an  3  BIS Review 102/2000  economic upswing in which macroeconomic conditions are more stable and inflation expectations lower than for many decades. Since the move to EMU, there have been no clear signs of asymmetric shocks that might hit a particular country or group of countries, although the Asian crisis and the subsequent unrest did affect the member states somewhat differently. And we do not know what would have happened during the tempestuous autumn of 1998 if Stage Three had not been well on the way. Perhaps exchange rate developments in Europe would have been considerably more dramatic and disruptive. It will be recalled that the Swedish currency’s deviation from a reasonable long-term level was considerably greater than that of, for example, the Finnish markka.