The sovereign debt crisis exposed weaknesses in the economic and monetary union (EMU), the integration process that brought the creation of the euro. MemberStates and EU institutions have taken several measures to tackle these shortcomings, including stricter rules on economic governance and setting up the European Stability Mechanism. Ideas to further strengthen EMU include the creation of a specific “fiscal capacity” for the countries that have adopted the single currency. In the longer term, this could lead to the establishment of a euro area budget.
In 2012, policy documents from EU institutions envisaged steps towards fiscal union, coupling budgetary discipline with solidarity tools. Two main functions are identified for an EMU fiscal capacity: 1) promoting structural reforms; 2) mitigating macro-economic shocks which affect only some euro-area countries.
The debate is now focusing on a “convergence and competitiveness instrument” (CCI) that would aim to address the first objective. A CCI would encompass both “contractual arrangements” through which Member States commit themselves to key structural reforms and financial incentives to facilitate the implementation of those reforms.
Proper democratic scrutiny of EMU economic governance, with new measures in this area possibly having implications for the European Parliament, is also central to the discussion.
[…] Day 11 of the 90 Day Grant Writing tutorial we discuss fiscal capacity. There are three questions you need to ask to determine if your organisation is fiscally capable of […]
[…] But can the EU budget make a significant difference? Or is it small too small to this end? Our keysource introduces the debate on the economic impact of the EU budget. In the context of the efforts to tackle the euro crisis, some analysts have argued that the objectives of economic and financial stability – a necessary precondition for growth – would require the creation of a dedicated “fiscal capacity” for the currency area. For more details on the rationale behind the idea of a euro area budget, see our briefing. […]
[…] On external affairs, we published briefings on EU-Mauritania fisheries, EU-Latin America trade (in French) and Brazil’s Belo Monte Dam project. Looking into internal affairs are our keysource on social protection for self-employed workers, our briefings on Trademark law in the EU and Rationale behind a euro area “fiscal capacity”. […]