The literature on the design of macroeconomic policies under the European monetary union is still surprisingly underdeveloped. The fact is that the EMU cannot be analysed as a standard national monetary union. The European framework is characterised by a unique combination of one central bank in charge of the single monetary policy and eleven national governments in charge of fiscal policies. This situation entails particular strategic interactions among the different decision makers. The specific features of the European policy game creates the need for a rigorous theoretical assessment of the optimal institutional framework required to achieve a proper co-ordination of the monetary-fiscal policy mix. The thesis provides theoretical foundations allowing to evaluate the current institutional framework (very independent central bank and budgetary restraints) and to suggest various amendments