Fiscal capacity for euro area ? towards a bigger EU budget?

Authors

  • Tomasz Rosiak University of Warsaw

DOI:

https://doi.org/10.12775/OeC.2015.020

Keywords:

fiscal capacity, fiscal federalism, European Union, euro area, EU budget

Abstract

The European Union has recently implemented one of the biggest reform packages in its history. Developed solutions are designed to (1) strengthen EU?s resilience to shocks and (2) improve its shock absorption capabilities. It seems that so far the stress was mainly placed on the first objective. Among the reforms which satisfied the second objective the European Stability Mechanism (ESM) plays the key role. However, this is not the only solution. The European Union is also developing a fiscal capacity for the European Monetary Union (EMU). On the base of a subject literature study, I have developed a model with boundary conditions of fiscal federalism (FF), which then was compared to macroeconomic data for the EU. The results of my findings show that the European Union, and especially the euro area, share a lot of characteristics typical for fiscal federalism. The biggest difference between EMU?s structure and FF model is insufficient size of central budget. As a result, the euro area is not equipped with stabilization tools which could act on the very early stage of a crisis. From this point of view, implementation of fiscal capacity in the form of central budget could fill this gap. However, it could bring further fragmentation of economic integration process in the EU, which probably would not positively contribute towards the stability in the political sphere.

Downloads

Download data is not yet available.

References

Boadway R. & Shah A. (2009). Fiscal Federalism: Principles and Practice of Multiorder Governance. Cambridge: Cambridge University Press, http://dx.doi.org/10.1017/CBO9780511626883.
Borzel, T. A. & Hosli, M. O. (2003). Brussels between Bern and Berlin: Comparative Federalism Meets the European Union. An International Journal of Policy, Administration, and Institutions, 16(2). http://dx.doi.org/10.1111/1468-0491.00213.
Completing Europe?s Economic and Monetary Union, (2015). Report by President of European Commission Jean-Claude Juncker, European Commission, Brussels
European Commission. (2015). The European Fund for Strategic Investments (EFSI). Retrieved from http://ec.europa.eu/priorities/jobs-growth-investment/p lan/efsi/index_en.htm (19.12.2015).
Fatas A. (1998). Does EMU need a fiscal federation? Economic Policy, 26. http://dx.doi.org/10.1111/1468-0327.00031.
Gordon, R. H. (1983). An Optimal Taxation Approach to Fiscal Federalism, Quarterly Journal of Economics, 98(4). http://dx.doi.org/10.2307/1881778.
Grosse, T. G. (2013). Semestr Europejski: poprawa zarządzania czy zmiana ustrojowa. Analiza Natolińska, 7(65).
Heins, E. & de la Porte, C. (2015). The sovereign debt crisis, the EU and welfare state reform. Comparative European Politics, 13. DOI: 10.1057/cep.2014.38.
Ioannou, D., Leblond P. & Niemann, A. (2015). European integration and the crisis: practice and theory. Journal of European Public Policy, 22(2). http://dx.doi.org/10.1080/13501763.2014.994979.
Mueller, D. C. (2004). Why federalism? In Molander P., Fiscal Federalism in Unitary States. Norwell: Kluwer Academic Publishers. http://dx.doi.org/10.1007/978-1-4615-0503-7_7.
Oates, W.E. (1999). An Essay on Fiscal Federalism. Journal of Economic Literature, 37(3). http://dx.doi.org/10.1257/jel.37.3.1120.
Rosiak, T. (2014a). Ewolucja roli polityki fiskalnej w najnowszej teorii ekonomii i praktyce gospodarczej. In Piątek, S. (Ed). Rola sektora publicznego w okresie kryzysu. Warszawa: Wydawnictwo Wydziału Zarządzania Uniwersytetu Warszawskiego.
Rosiak, T. (2014b). Fiscal federalizm as a solution for eurozone problems. Problemy Zarządzania, 12(4).
Stiglitz, J. E. (2004). Ekonomia sektora publicznego. Warszawa: Wydawnictwo Naukowe PWN.
Tchorek, G. (2013). Nierównowagi fiskalne i makroekonomiczne w strefie euro a nowe rozwiązania instytucjonalne. Management and Business Administration. Central Europe, 21(2).
Tiebout, Ch. M. (1965). A pure theory of local expenditures, Journal of Political Economy, 64(5). http://dx.doi.org/10.1086/257839.
Towards A Genuine Economic And Monetary Union, (2012a). Report by President of the European Council Herman Van Rompuy, European Council, EUCO 120/12, 26 June 2012, Brussels
Towards A Genuine Economic And Monetary Union, (2012b). Report by President of the European Council Herman Van Rompuy, European Council, 5 December 2012, Brussels
Verdun, A. (2015). A historical institutionalist explanation of the EU's responses to the euro area financial crisis. Journal of European Public Policy, 22(2). DOI: 10.1080/13501763.2014.994023.
Vetter, S. (2013). Do all roads lead to fiscal union? EU Monitor, European integration, 11 April 2013.
Vollaard, H. (2014). Explaining European Disintegration. Journal of Common Market Studies, DOI: 10.1111/jcms.12132.
Wolff, G. (2012). A budget for Europe?s monetary union. Bruegel Policy Contribution, 2012/12.

Downloads

Published

30-09-2015

Issue

Section

Articles

How to Cite

Rosiak, T. (2015). Fiscal capacity for euro area ? towards a bigger EU budget?. Oeconomia Copernicana, 6(3), 45-60. https://doi.org/10.12775/OeC.2015.020

Similar Articles

51-60 of 199

You may also start an advanced similarity search for this article.