The Macroeconomic Imbalance Procedure – Rationale, Process, Application: A Compendium published by European Commission (2016).
“This Compendium takes stock of the implementation of the Macroeconomic Imbalance Procedure (MIP) five years after its introduction. The Compendium presents the MIP rationale; reiterates the legal and procedural aspects of the MIP; discusses principles, criteria and analytical frameworks used in the MIP implementation; and reviews the MIP application in practice. By doing that, this report provides a wealth of information that helps to understand what the MIP is, how it works, and how its application has evolved since its introduction. The objective of this publication is to present the MIP and its implementation in a spirit of transparency, in line with the October 2015 Commission Communication on “On Steps towards completing Economic and Monetary Union” also with a view to future MIP decisions.
The MIP was established after the 2008-2009 financial crisis with the aim of strengthening EU economic governance in order to support macrofinancial stability. The introduction of the euro was followed by a narrowing of interest rate differentials and large capital flows from the euroarea core to the euro area periphery and the economies of the new Member States. At the same time, these flows were matched by growing current account imbalances, inflation differentials and divergent price competitiveness; and in some cases with a contribution to the financing of asset market bubbles in recipient countries, notably housing. The 2008-2009 crisis was accompanied by a general reappraisal of risk in financial markets and acted as a trigger for sudden stops and reversals in current account financing and for the burst of asset bubbles…”
