Resumen de Fiscal Stabilisation for EMU: Managing Incompleteness
Päivi Leino Sandberg, Tuomas Saarenheimo
The dominant narrative presents the Economic and Monetary Union (EMU) as an incomplete structure. According to this narrative, to operate stably EMU needs to be supplemented by deeper fiscal integration and, in particular, a fiscal mechanism to smooth the effects of asymmetric shocks on Member States. We study recent proposals for such mechanisms from a multi-disciplinary viewpoint. We show that, with respect to their aims and implementation, most proposed mechanisms are novel, essentially without precedent in established federations. While possible to construct, at least in a limited form, within the current Treaties, the economic benefits of the proposed mechanisms are likely to fall short of the anticipated goals, and the enforcement of the eligibility conditions will almost certainly turn out to be politically difficult. We argue that while the narrative of incompleteness is, in some sense, correct, the proposed remedies are misguided. The fundamental nature of EMU’s incompleteness is not economic but political, the lack of integrated political structures required to legitimise the use of public power by the Union. Deeper fiscal integration would not solve this incompleteness but would merely change the ways it manifests itself.
