INTERNATIONAL POLICY ANALYSIS European Economic Government and Wage Policy Coordination The Eurozone Crisis Calls for Structural Reforms KLAUS BUSCH May 2010 The euro’s Greek crisis has triggered a long overdue debate on the structural defects of European economic policy and the imbalances in intra-European trade. It is now time to make good the Maastricht Treaty’s shortcomings with regard to the construction of Economic and Monetary Union(EMU). The Eurozone needs a European economic government, including the Europeanisation of budget competences in order to be able to operate an effective fiscal policy and prevent overindebtedness on the part of the member states. The Eurozone needs European coordination of national wage policies in order to be able to prevent the distortion of competition and major imbalances in intra-European trade, with outright winners and losers. To this end, coordination of European social and tax policies is also needed. More cooperation between the EU and Greece would have made it possible to prevent a worsening of the Greek crisis. The country is now being required to implement a drastic austerity policy which makes no sense on either economic or social grounds.