Fiscal Federalism in Crisis: Lessons for Europe from the US

Darvas, Zsolt (2010) Fiscal Federalism in Crisis: Lessons for Europe from the US. Working Paper. BCE Matematikai Közgazdaságtan és Gazdaságelemzés tanszék, Budapest.

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The euro area is facing crisis, while the US is not, though the overall fiscal situation and outlook is better in the euro area than in the US, and though the US faces serious state-level fiscal crises. A higher level of fiscal federalism would strengthen the euro area, but is not inevitable. Current fiscal reform proposals (strengthening of current rules, more policy coordination and an emergency financing mechanism) will if implemented result in some improvements. But implementation might be deficient or lack credibility, and could lead to disputes and carry a significant political risk. Introduction of a Eurobond covering up to 60 percent of member states’ GDP would bring about much greater levels of fiscal discipline than any other proposal, would create an attractive Eurobond market, and would deliver a strong message about the irreversible nature of European integration.

Item Type:Monograph (Working Paper)
Uncontrolled Keywords:federalism, redistribution, stabilisation, risk-sharing, crisis, euro-area governance reform, Eurobond, JEL: E62, H12, H60, H77
Divisions:Faculty of Economics > Department of Mathematical Economics and Economic Analyses
Subjects:Economic policy
International economics
ID Code:309
Deposited By: Ádám Hoffmann
Deposited On:09 Mar 2011 16:03
Last Modified:18 Oct 2021 09:29

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