The current paper deals with the labour market effects of European Monetary Union (EMU). We compare the EU-memberstates' susceptibility to asymmetric shocks and their labour market flexibility under status quo conditions. The fin- dings are related to the question which countries are - from a labour market point of view - fit for EMU and which countries should not join EMU from the start. We then consider different policy scenarios and develop an institutional framework suitable to make EMU a labour market success. Special emphasis is given to the optimal interplay between the relevant agents, i.e. the EU-Commission, national governments, employers and trade unions.