A central fiscal capacity is a recurring topic in discussions on reform of the Economic and Monetary Union, but no consensus on the usefulness and necessity of a such a capacity has been reached. This column, part of the Vox debate on euro area reform, argues that the potential stability benefits of a central fiscal capacity can be achieved through stronger financial market risk sharing and more effective use of fiscal stabilisers, without any additional fiscal risk sharing....
To conclude, the euro area should focus on completing Banking Union, developing a capital market union, and ensuring that its members have the fiscal space to use automatic stabilisers in a downturn. Doing so would strengthen both financial and fiscal stabilization mechanisms and obviate the need for a central fiscal capacity.Longish and detailed. Compares EZ rules with US federalism.
Voxeu
A more stable EMU does not require a central fiscal capacity
Michel Heijdra, Tjalle Aarden, Jesper Hanson, Toep van Dijk
