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The Fiscal Union and the Eurozone Debt Problem

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  • Ionela Baltatescu

Abstract

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.

Suggested Citation

  • Ionela Baltatescu, 2012. "The Fiscal Union and the Eurozone Debt Problem," Revista de Economie Mondiala / The Journal of Global Economics, Institute for World Economy, Romanian Academy, vol. 4(3), September.
  • Handle: RePEc:iem:journl:v:4:y:2012:i:3:id:2822000008747099
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    File URL: http://www.iem.ro/rem/index.php/REM/article/view/93/79
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    More about this item

    Keywords

    public debt; fiscal union; Eurobonds; ECB bond buying; Euro-TARP;

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H69 - Public Economics - - National Budget, Deficit, and Debt - - - Other
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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