European labour markets have been shaped by the social histories each of member country, and still display great heterogeneity today. No European initiative has yet opened the way to any real harmonisation in this field. But this is now a burning issue: does the diverse functioning of European labour markets not risk being a handicap in tackling the cyclical fluctuations within EMU? The answer given to this question here is negative. Though wage flexibility varies across countries, it is not sufficient to lead to national reactions that are strongly asymmetric. It does not therefore constitute a problem for common policies. Nor is wage flexibility a remedy at the national level. Indeed, such flexibility in Europe is insufficient to compensate for the loss of the exchange rate instrument in the face of asymmetric shocks.
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