Determine the Case against Coordination

Coming again to EMU platform we find some arguments against coordination also. For example, the core of the argument against coordination is the fear that an arrangement under which monetary authorities seeks instruction from fiscal authorities which would confuse the roles of fiscal and monetary policy and jeopardise the credibility of the ECB. Even if the institutional ties between fiscal and monetary authorities remain unchanged under coordination, since centralisation reduces the number of independent fiscal players  in the Euro Area the (potential) pressure on the ECB to monetise excessive public debt will increase. Under these circumstances, the common policy approach to coordination contradicts its primary purpose by generating greater inconsistency in the macroeconomic policy mix.