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The Fiscal Union and the Eurozone Debt Problem

  • Ionela Baltatescu

The present paper summarizes the main characteristics of the Eurozone institutional setup and the related economic and political incentives that drive Eurozone governments to increase their public debts, disregarding the limits agreed in the European treatises. The first part of the paper contains a review of the Eurozone institutional setup and of the incentives it creates for Eurozone member states to increase their deficits and public debts. The second part of the paper carries out a short review and criticism of the main strategies and policy tools to fight Eurozone debt problem: ECB bond buying, EFSF/ESM leverage, Eurobonds and Euro-TARP. The main conclusion of the paper is that establishing a fiscal union in EU does not solve by itself the public debt problem of Eurozone member states if the institutional mechanism of debt accumulation, debt rollover and risk socialization are not dismantled.

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File URL: http://www.iem.ro/rem/index.php/REM/article/view/93/79
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Article provided by Institute for World Economy, Romanian Academy in its journal Revista de Economie Mondiala.

Volume (Year): 4 (2012)
Issue (Month): 3 (September)
Pages:

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Handle: RePEc:iem:journl:v:4:y:2012:i:3:id:2822000008747099
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