Fiscal Federalism in Crisis: Lessons for Europe from the US
AbstractThe euro area is facing crisis, while the US is not, though the overall fiscal situation and outlook is better in the euro area than in the US, and though the US faces serious state-level fiscal crises. A higher level of fiscal federalism would strengthen the euro area, but is not inevitable. Current fiscal reform proposals (strengthening of current rules, more policy coordination and an emergency financing mechanism) will if implemented result in some improvements. But implementation might be deficient or lack credibility, and could lead to disputes and carry a significant political risk. Introduction of a Eurobond covering up to 60 percent of member states’ GDP would bring about much greater levels of fiscal discipline than any other proposal, would create an attractive Eurobond market, and would deliver a strong message about the irreversible nature of European integration.
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Bibliographic InfoPaper provided by Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest in its series Working Papers with number 1002.
Length: 19 pages
Date of creation: 12 Jul 2010
Date of revision: 10 Sep 2010
federalism; redistribution; stabilisation; risk-sharing; crisis; euro-area governance reform; Eurobond;
Other versions of this item:
- Zsolt Darvas, 2010. "Fiscal Federalism in Crisis: Lessons for Europe from the US," IEHAS Discussion Papers 1021, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Zsolt Darvas, 2010. "Fiscal federalism in crisis: lessons for Europe from the US," Policy Contributions 420, Bruegel.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-18 (All new papers)
- NEP-EEC-2010-09-18 (European Economics)
- NEP-MAC-2010-09-18 (Macroeconomics)
- NEP-PBE-2010-09-18 (Public Economics)
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- Lannoo, Karel, 2011. "EU Federalism in Crisis," CEPS Papers 6498, Centre for European Policy Studies.
- Zsolt Darvas, 2012. "The euro crisis: ten roots, but fewer solutions," Policy Contributions 755, Bruegel.
- Costain, James & de Blas, Beatriz, 2012. "The role of fiscal delegation in a monetary union: a survey of the political economy issues," Working Papers in Economic Theory 2012/11, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
- Nils aus dem Moore, 2010. "Eine Wirtschaftsregierung für Europa? – Die EU braucht bessere governance, aber kein gouvernement économique," RWI Positionen, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 24, December.
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