Recently, in most of the economically advanced European countries inflation has been substantially reduced. But that went together with a rise in the rate of unemployment to levels not experienced for the last 30 years. Forecasts predict that unemployment is unlikely to decrease within the coming years. The increased interdependence of national economies led to calls for coordinated policy actions in order to expand economic activity in Europe, thus avoiding costly non-cooperative strategies.

There is, however, a strong criticism of proposals for coordination of national stabilisation policies. Economic theory, it is said, proves that such a coordination is at best superfluous and may even be harmful. An eloquent exponent of this view is Vaubel (1985).

This view is the result of assuming that there is no need for macropolicy on a national level in the first place. The present paper intends to show that this cannot be justified on purely theoretical grounds. It will be argued that this assumption does not follow from sound theoretical arguments.