Cover Departmental Papers
Buy Book in Print
Revisiting the Economic Case for Fiscal Union in the Euro Area
Author:
Mr. Helge Berger
Search for other papers by Mr. Helge Berger in
Current site
Google Scholar Close
,
Mr. Giovanni Dell'Ariccia
Search for other papers by Mr. Giovanni Dell'Ariccia in
Current site
Google Scholar Close
, and
Mr. Maurice Obstfeld
Search for other papers by Mr. Maurice Obstfeld in
Current site
Google Scholar Close
Series:
Departmental Papers
Volume/Issue:
Volume 2018: Issue 003
Language:
English
Publication Date:
20 Feb 2018
DOI:
https://doi.org/10.5089/9781484340424.087
ISBN:
9781484340424
ISSN:
2616-5333
Pages:
63
Keywords:
DPPP; DP; monetary policy; public goods; banking system; exchange rate; fiscal policy; single currency; risk sharing; sovereign bond market; transmission mechanism; market yield; Fiscal union; Monetary unions; Moral hazard; Sovereign bonds; Europe
Legal-disclaimer:
The Departmental Paper Series presents research by IMF staff on issues of broad regional or cross-country interest. The views expressed in this paper are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (1.3 MB) Download Epub
The paper makes an analytical contribution to the revived discussion about the euro area’s institutional setup. After significant progress during the euro crisis, the drive to complete Europe’s Economic and Monetary Union (EMU) had stalled, and the way forward will benefit from an in-depth look at the conceptual issues raised by the evolution and architecture of Europe, and the tradeoffs involved. A thorough look at the underlying economic issues suggests that in the long run, EMU will benefit from progressing along three mutually supporting tracks: introduce more fiscal risk sharing, helping to make the sovereign “no bailout” rule credible; complementary financial sector reforms to delink sovereigns and banks; and more effective rules to discourage moral hazard. This evolution would ensure that financial markets provide incentives for fiscal discipline. Introducing more fiscal union comes with myriad legal, technical, operational, and political problems, raising questions well beyond the remit of economics. But without decisive progress to foster fiscal risk sharing, EMU will continue to face existential risks.
  • Collapse
  • Expand
Cover Departmental Papers
Departmental Papers
ISSN:
2616-5333
Publisher:
International Monetary Fund