Macroeconomic performance in the Economic and Monetary union (EMU) will be impaired if national fiscal policy flexibilityand monetary flexibility of the ECB islimited, goods markets adjustsluggishly, labor mobility is low, and automatic stabilization fromfederal taxes and government spending is low. This paper analyzes thestabilization of output fluctuations induced by symmetric andasymmetric macroeconomic shocks in the EMU. It is shown how nationalfiscal flexibility and flexibility of the monetary policy of the ECBcan stabilize fluctuations of the average EU business cycle that aregenerated by symmetric shocks. Furthermore, it is demonstrated how,under EMU, national fiscal flexibility and a system of fiscaltransfers are able to stabilize differences in national businesscycles that are generated by asymmetric shocks.