The RASTANEWS project aims at answering the following questions:

• how the evolving system of economic governance in the EU (including the implementation of the common monetary policy, mechanisms of economic policy coordination and the system of financial market supervision) is likely to affect economic stability in the Union and in individual Member States, taking into account the risks involved and the challenge of solving the debt problem;
• how the evolving system of economic governance is likely to work in practice, given the complex inter-institutional setting which might combine Community and intergovernmental efforts. The research should analyse the integration of the decision making processes of economic governance in Europe and the roles of actors involved at national and EU levels;
• what risks the EU (or the Member States) should absorb, and how the institutional framework can respond to these risks and find solid systemic solutions, including potential debt restructuring;
• how should the relations between the Eurozone countries and other EU Member States be improved, especially in the context of deepening macro-economic integration in the Eurozone.

The RASTANEWS view is that a convincing reply to these questions can only come through a rethinking of the theoretical and empirical framework over which macroeconomic research has focused in recent years.

In particular, we find there are three key issues about the working of the macro-economy that deserve deeper investigation: incomplete and informationally inefficient financial markets, the Achilles' heel of the consensus DSGE models; heterogeneity in expectations, which should play a fundamental role in explaining the behaviour of asset prices, and the need to overcome the traditional dichotomy between Keynesian (short run) and neoclassical (long run) policy prescriptions.

The different research units will analyse the issues at hand from different perspectives but with the common objective to give rise to a new theoretical and empirical framework, able to give useful policy guidance to the ongoing European reform process.