The Stability and Growth Pact must be reinforced, have greater automaticity and entail graduated sanctions. Fiscal surveillance must be improved through the establishment of a European Fiscal Stability Agency and the European Financial Stability Facility must be made permanent.
The recent financial and economic crisis had particularly severe employment and welfare implications for newly flexible labour markets. Only a coherent approach to the integration of markets and market-correcting policies may in the future prevent uncoordinated social and employment policies from endangering the political sustainability of economic integration, writes the author of this analysis.