Thinking beyond a fiscal union

20 December 2011
Janis A. Emmanouilidis (Director of Studies) and Fabian Zuleeg (Chief Executive and Chief Economist)

The EU and the euro countries in particular are gradually moving towards a fiscal union. But will the new 'fiscal compact', which adds to an already very complex crisis recipe, prove to be enough to manage and eventually overcome the crisis?

This Commentary by Janis A. Emmanouilidis and Fabian Zuleeg argues that it will not be sufficient. However, the new intergovernmental agreement might still be a significant milestone.

Steps towards establishing a 'fiscal union' may not only convince and enable the European Central Bank (ECB) to act as a temporary 'buyer of last resort', but also prepare the political ground for two major innovations: the need to balance austerity and growth in the framework of a 'New Deal', and the introduction of some form of (temporary) debt collateralisation.

Thinking beyond a fiscal union