Summary of Which Fiscal Union for the Euro Area?

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Which Fiscal Union for the Euro Area? summary
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The euro zone, once so promising, has become a drag on economic growth. Economists Agnès Bénassy-Quéré, Xavier Ragot and Guntram B. Wolff blame the disconnect between centralized monetary policy and uncoordinated national fiscal policies. They suggest several valid ideas, such as a federal backstop for the banking system and regional unemployment insurance that would take effect only during crises. Their advice focuses on harmonizing policies across the euro zone’s 19 member states, which tend to act in their own narrow interests. getAbstract recommends this instructive, scholarly report to policy makers and investors interested in solutions to Europe’s malaise.

About the Authors

Agnès Bénassy-Quéré is a professor at the Paris School of Economics. Xavier Ragot is president of the French Economic Observatory. Guntram B. Wolff is the director of Bruegel.



A common currency and discordant fiscal policies mark the euro zone. The members share a monetary policy, but each nation makes its own fiscal decisions. European leaders have no way to impose a joint fiscal strategy across 19 national budgets. In the euro area, the only equivalent of a federal budget is the European Stability Mechanism (ESM), which had a 2016 lending capacity of €500 billion [about $568 billion].

The euro zone should take steps to unite its “fragmented banking system.” The Greek negotiations of 2014–2015 illustrated both the hazards of deposit flight and the...

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