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Fiscal Transfers and Risk Sharing in the Eurozone

In: Optimal Currency Areas and the Euro, Volume III

Author

Listed:
  • Johannes Kabderian Dreyer

    (Roskilde University (RUC), ISE)

  • Peter Alfons Schmid

    (FOM University of Applied Sciences)

Abstract

This chapter reviews the literature on fiscal transfers as a mechanism for risk sharing in the Eurozone (EZ). In a monetary union whose members lack independent monetary policies, fiscal federalism is necessary to mitigate asymmetric shocks. The chapter uses existing literature and comparisons with other fiscal federations to discuss the current limitations of the EZ. The currency union lacks robust stabilization tools that can be observed in interregional fiscal systems of established federal states (e.g., United States, Canada, Germany, and Switzerland). This calls for the development of a permanent and automatic mechanism of fiscal transfers that can preserve macroeconomic stability and resilience.

Suggested Citation

  • Johannes Kabderian Dreyer & Peter Alfons Schmid, 2026. "Fiscal Transfers and Risk Sharing in the Eurozone," Springer Books, in: Optimal Currency Areas and the Euro, Volume III, chapter 2, pages 17-43, Springer.
    • Handle: RePEc:spr:sprchp:978-3-032-12903-1_2
    DOI: 10.1007/978-3-032-12903-1_2
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