Bruegel what kind of fiscal union

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Macrofinancial Stability and the Euro. My aim is to examine the implications of monetary union for macrofinancial stabilisation policies at national and area-wide levels.

The boom-bust-crisis-recovery cycle that the euro area has … Expand. Should Europe Become a Fiscal Union. Moving towards a fiscal union does not address the problems of divergence in Europe. Given cultural heterogeneity and diverse preferences, fiscal policy should remain under national sovereignty while … Expand. View 1 excerpt, cites background. What are the prerequisites for a euro area fiscal capacity?

It outlines three steps and their prerequisites. In the first step, Banking Union would be completed to … Expand. Sound public finances are a prerequisite for the functioning and economic prosperity of a common currency union. The financial, economic and European sovereign debt crises revealed that also … Expand. Many believe that a common currency requires closer fiscal and political integration … Expand. The crisis which initiated in the housing market of the USA in has since spread to the world financial system and the real economy.

Moreover, the monetary policy was itself stodgy in countering the crisis, and banking-sector problems were allowed to fester. And it was considered inappropriate to impose losses on private-sector creditors. Thus, the nature of the incomplete monetary union and the self-imposed taboos led deep and persistent fiscal austerity to become the norm.

As a consequence, growth was hurt, which undermined the primary objective of lowering the debt burden. To prevent a meltdown, distressed nations were given official loans to repay private creditors.

But the stress and instability continued and soon it became necessary to ease the repayment terms on official loans. When even that proved insufficient, the German-inspired fiscal austerity was combined with the deep pockets of the European Central Bank.