Cost of non-Europe – Improved coordination of fiscal policies

Unless national fiscal policies are effectively coordinated, there can be significant negative ‘spill-over’ effects among the Member States participating in Economic and Monetary Union (EMU), and more widely across the European Union. New research commissioned by the European Added Value Unit58 estimates the one-off cost of not having reinforced fiscal coordination at 85 billion euro per annum, in the case of a new sovereign debt crisis, or 58 billion euro per annum, in the case of a new financial crisis. Although both scenarios are non-continuous59 by nature, a mid-range value of 72 billion euro has been retained for this paper. As in the case of the Banking Union, and following the recent history of financial or banking crises affecting the European economy once a decade on average, we have calculated that the annual cost of not coordinating fiscal policies would be broadly equivalent to dividing this anticipated one-off loss by ten, so representing a cost of some 7 billion on an annualised basis.