The chapter by Niels Thygesen makes an important contribution towards our understanding of the institutional and economic contents of Stage II of EMU. I will focus my comments on three issues: (i) differences between Stages I and II; (ii) stability in Stage II, and (iii) convergence criteria for entering into Stage III.

Differences between Stage I and Stage II

I agree with the author that the Maastricht Treaty is a major step foward in the construction of EMU since it shows the political will to complete the process in a limited time horizon. I also share the view that at the heart of the compromise reached at Maastricht lies the principle of indivisibility; namely, that monetary sovereignty will remain firmly in the hands of the national authorities until the beginning of Stage III. This is critical to understanding why there will not be any gradual transfer of monetary sovereignty in Stage II from the national sphere towards the central monetary institution – the EMI – as originally envisaged by the Delors Report. As a result, Stage II will represent mainly an intensification of the process of monetary co-ordination already present in Stage I together with some elements of institutional preparation for Stage III.

Niels Thygesen would have liked to see a qualitiatively different Stage II with more monetary content and where the EMI had been empowered to use monetary instruments to regulate the overall monetary conditions in the Community.