Abstract: This paper investigates the role of fiscal and monetary policies over the aggregate EMU business cycle, with a specific focus on fiscal policies. We estimate large multipliers for public consumption and transfers. In spite of this, fiscal policies were substantially muted. This result is confirmed even for the post 2007 period. In fact fiscal policies did not complement the monetary policy stimulus in response to the financial crisis. Further, we cannot detect any substantial aggregate effect of austerity measures implemented in peripheral countries. Finally, the post-2007 surge in expenditure-to-GDP ratios was apparently determined by non-policy shocks that reduced output growth.