Publication

This paper seeks to broaden the debate about the future fiscal capabilities of the Eurozone. As its author sees it, the current focus is too narrow. (It merely compares the technical advantages and disadvantages of "different modalities of cross-country fiscal shock absorbers.") What really needs to be done is to link these discussions with broader ones that focus on fiscal union and the exercising of political power within the European Monetary Union (EMU). The latter discussions include 1) ensuring fiscal discipline and stable sovereign debt markets; 2) protecting Eurozone countries against the risk of asymmetric shocks; 3) equipping the Euro area with the capacity to stabilize its overall economy over unstable cycles; 4) providing budgetary support for further economic convergence; and 5) ensuring an appropriate fiscal backstop for the banking union. Finally, the paper's author discusses the relevance of these various issues in today’s EMU and their role in "mutualizing" budgetary resources and powers.