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A budget for Europe's monetary union

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  • Guntram B. Wolff

Abstract

The four main options for stabilisation of regional shocks to the euro area are - unemployment insurance, payments related to deviations of output from potential, the narrowing of large spreads, and discretionary spending. The common resource would need to be well-designed to be distributionally neutral, avoid free-riding behaviour and foster structural change while be of sufficient size to have an impact. Linking budget support to large deviations of output from potential appears to be the best option. A borrowing capacity equipped with a structural balanced budget rule could address area-wide shocks. It could serve as the fiscal backstop to the bank resolution authority. Resources amounting to 2 percent of euro-area GDP would be needed for stabilisation policy and financial stability.

Suggested Citation

  • Guntram B. Wolff, 2012. "A budget for Europe's monetary union," Policy Contributions 762, Bruegel.
  • Handle: RePEc:bre:polcon:762
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. La stabilisation macroéconomique en Zone Euro (II)
      by simon.ganem@hotmail.fr (Simon Ganem) in BS Initiative on 2014-02-12 11:29:33

    Citations

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    Cited by:

    1. Jörg Bibow, 2013. "Lost at Sea:The Euro Needs a Euro Treasury," FMG Special Papers sp227, Financial Markets Group.
    2. Győrffy, Dóra, 2014. "Válság és válságkezelés Görögországban. A puha költségvetési korlát szerepe a gazdasági összeomlásban
      [Crisis and crisis management in Greece. The role of soft budget constraints in the economic co
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 27-52.
    3. Jörg Bibow, 2013. "Lost at Sea: The Euro Needs a Euro Treasury," IMK Studies 35-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Jacques Drèze & Alain Durré & Jacques Drèze & Jean-François Carpantier, 2014. "Fiscal Integration and Growth Stimulation in Europe," Recherches économiques de Louvain, De Boeck Université, vol. 80(2), pages 5-45.
    5. Mathias Dolls & Clemens Fuest & Friedrich Heinemann & Andreas Peichl, 2016. "Editor's Choice Reconciling Insurance with Market Discipline: a Blueprint for a European Fiscal Union," CESifo Economic Studies, CESifo, vol. 62(2), pages 210-231.
    6. repec:ris:ecoint:0830 is not listed on IDEAS
    7. Fritz Breuss, 2012. "Towards a New EMU," WIFO Working Papers 447, WIFO.
    8. Heikki Oksanen, 2016. "Smoothing Asymmetric Shocks vs. Redistribution in the Euro Area: A Simple Proposal for Dealing with Mistrust in the Euro Area," CESifo Working Paper Series 5817, CESifo Group Munich.
    9. Jorg Bibow, 2013. "Lost at Sea: The Euro Needs a Euro Treasury," Economics Working Paper Archive wp_780, Levy Economics Institute.
    10. repec:cpn:umkeip:v:16:y:2017:i:4:p:413-432 is not listed on IDEAS
    11. Delbecque, Bernard, 2013. "Proposal for a Stabilisation Fund for the EMU," CEPS Papers 8494, Centre for European Policy Studies.
    12. Nazaré Costa Cabral, 2016. "Which Budgetary Union for the E(M)U?," Journal of Common Market Studies, Wiley Blackwell, vol. 54(6), pages 1280-1295, November.
    13. Mario Sarcinelli, 2013. "The European Banking Union: Will It Be a True Union without Risk Sharing?," PSL Quarterly Review, Economia civile, vol. 66(265), pages 137-167.

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