(15 January 2016) – A policy paper by Eulalia Rubio (Jacques Delors Institute) aims to broaden the debates on fiscal union and the exercise of political power in EMU.
Discussions about a future fiscal capacity for the euro area are too often limited to a comparison of the technical advantages and disadvantages of different modalities of cross-country fiscal shock absorbers.
Through an analysis of past and current debates on EMU, this policy paper identifies five different rationales for deepening budgetary integration in a monetary union: ensuring fiscal discipline and stable sovereign debt markets, protecting euro area countries against the risk of asymmetric shocks, equipping the euro area with a capacity to stabilize the economy over the cycle, providing budgetary support for convergence and providing an appropriate fiscal backstop for the banking union.
A key message of the paper is the need to reflect on the sequence and consistency between actions taken in response to different logics for budgetary integration.