While mainstream economists were convinced they had solved the business cycle phenomena of macroeconomic policy making, the Great Recession has once again underscored the verdict of history, where every boom has almost always been accompanied by a bust and recession. The book discusses theoretical controversies and state-of-the art empirical studies on the link between external imbalances and real income convergence in the European Union. The book shows successful real income convergence across the European Union on the country level and pinpoints persistent regional disparities within countries in most of the member states of the European Union. The book addresses broader aspects of external imbalances and their key determinants and provides fresh empirical and exploratory evidence on paradigm shifts in the past several decades. This book also empirically estimates both the causality between public debt and economic growth as well as the optimum level of public debt for EU member states. Additionally, the book discusses the link between illicit capital flows and external imbalances in the European Union. Overall, the book critically investigates both theoretical frameworks of global imbalances and systematically evaluates milestones and paradigm shifts in global imbalances; it also offers new empirical results based on the panel data of both "old" and "new" EU member states in the past several decades. Finally, the book addresses a number of the policy challenges, disputes and controversies in the European Union in terms of solving the ongoing external imbalances and harmonizing policies to prevent future challenges.