Three major challenges confront European policymakers and financial systems; (1) to preserve and strengthen policy coordination between the countries participating and the European Monetary System; (2) to design the future structure of the Economic and Monetary Union; (3) to implement constructive economic and financial responses to the major economic and political reform in Eastern Europe. The purpose of this book is to present a comprehensive analysis of these challenges, focusing on the relationships between fiscal policies on the one hand and financial systems on the other. The basis for the work is formed by the discussions, which took place at the 16th Colloquium of the SocietA(c) Universitaire EuropA(c)enne de Recherches FinanciA]res (SUERF). Private savings and the taxation of income from capital, imbalances in public sector budgets and their impact on financial systems, international resource transfers and the respective roles of governments and private capital flows, and the policy mix in the transition to Economic and Monetary Union are central themes of the book. This collection of papers, authored by members of the university, private financial sector and national and international policymaking communities, is of central importance to policymakers, bankers, financial executives, and academics.