A budget for Europe's monetary union
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.
|Date of creation:||Dec 2012|
|Contact details of provider:|| Postal: Rue de la Charité, B-1210 Brussels|
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