Designing a Permanent EU-Wide Stabilization Facility

doi:10.1017/9781009364706.025

21 - Designing a Permanent EU-Wide Stabilization Facility

from Part III - The Economic and Fiscal Dimensions

Published online by Cambridge University Press: 28 September 2023

Roel Beetsma and

George Kopits

Edited by

Dariusz Adamski ,

Fabian Amtenbrink and

Jakob de Haan

Show author details

Dariusz Adamski: Affiliation:
University of Wroclaw
Fabian Amtenbrink: Affiliation:
Erasmus Universiteit Rotterdam
Jakob de Haan: Affiliation:
University of Groningen

Book contents

Get access

Summary

While the EU recovery plan provides a useful step in alleviating the economic effects of the COVID-19 crisis and achieving further European integration, a much-needed permanent fiscal stabilization capacity dealing with major crises is still missing. Such an EU-wide stabilization function would be in accordance with the subsidiarity principle, enshrined in the Treaty of Maastricht, as the risk-sharing that it provides can only be conducted at the supranational level. The chapter envisages a mechanism to semi-automatically respond to region- and country-specific shocks via a central fiscal stabilization fund (CFSF). A well-designed CFSF has the potential to improve welfare not only in crisis-hit member countries, but also in the union as a whole.

Information

Type: Chapter
Information: The Cambridge Handbook of European Monetary, Economic and Financial Integration , pp. 377 - 396

DOI: https://doi.org/10.1017/9781009364706.025 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2023

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Book purchase

Temporarily unavailable

References

Arnold, N., Barkbu, B., Ture, E., Wang, H., and Yao, J. (2018). A central fiscal stabilization capacity for the euro area. IMF Staff Discussion Note No. 18/03.CrossRef Google Scholar

Baldwin, R., and Weder di Mauro, B. (eds.) (2020). Economics in the Time of COVID-19. London: VoxEU eBook, CEPR Press.Google Scholar

Beetsma, R., Burgoon, B., Nicoli, F., de Ruijter, A., and Vandenbroucke, F. (2022). What kind of EU fiscal capacity? Evidence from a randomized survey experiment in five European countries in times of corona. Economic Policy, 37(111), 411–459.CrossRef Google Scholar

Beetsma, R., Cima, S., and Cimadomo, J. (2021). Fiscal transfers without moral hazard? International Journal of Central Banking 17(3), 95–153.Google Scholar

Beetsma, R., and Kopits, G. (2020). Designing a permanent EU-wide stabilization facility. CESifo Working Paper No. 8735.Google Scholar

Berger, H., Dell’Ariccia, G., and Obstfeld, M. (2019). Revisiting the case for a fiscal union in the euro area. IMF Economic Review 67(3), 657–683.CrossRef Google Scholar

Buiter, W. H., and Sibert, A. C. (2005). How the eurosystem’s treatment of collateral in its open market operations weakens fiscal discipline in the eurozone. In Fiscal Policy and the Road to the Euro. Warsaw: National Bank of Poland.Google Scholar

Buti, M., and Carnot, N. (2018). The case for a central fiscal capacity in EMU. VoxEU, 7 December.Google Scholar

Darvas, Z. (2020). Having the cake, but slicing it differently: How is the grand EU recovery fund allocated? Bruegel, Brussels, 23 July.Google Scholar

De Grauwe, P., and Ji, Y. (2016). Flexibility versus stability: A difficult trade-off in the eurozone. CEPS Working Document No. 422.Google Scholar

de Haan, J., and Kosterink, P. (2018). The case for more fiscal risk sharing and coordination of fiscal and monetary policy. In Campos, N. F. and Sturm, J. E. (eds.), Bretton Woods, Brussels, and Beyond Redesigning the Institutions of Europe. London: A VoxEU.org Book, CEPR, Ch. 14, pp. 107–116.Google Scholar

Dullien, S., Paetz, C., Repasi, R., Watt, A., and Watzka, S. (2021). Between high ambition and pragmatism: Proposals for a reform of fiscal rules without treaty change, Study for the European Economic and Social Committee. www.eesc.europa.eu/sites/default/files/files/qe-01-21-510-en-n.pdf Google Scholar

European Central Bank (2020). The fiscal implications of the EU’s recovery package. ECB Economic Bulletin, 6/2020, Frankfurt, 23 September.Google Scholar

European Commission (2016). Quarterly report on the euro area. Institutional Paper No. 30, Brussels, July.Google Scholar

European Commission (2020). The EU budget powering the recovery plan for Europe. Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions, COM(2020) 442 final, Brussels, 27 May.Google Scholar

European Council (2020). Special meeting of the European Council (17, 18, 19, 20 and 21 July 2020) – Conclusions (CO EUR 8 CONCL 4). Brussels.Google Scholar

European Fiscal Board (2017). Annual report 2017. Brussels.Google Scholar

European Fiscal Board (2018). Assessment of the fiscal stance appropriate for the euro area in 2019. Brussels.Google Scholar

European Fiscal Board (2019). Assessment of EU fiscal rules – with a focus on the six and two-pack legislation. Brussels.Google Scholar

Farhi, E., and Tirole, J. (2018). Deadly embrace: Sovereign and financial balance sheets doom loops. Review of Economic Studies 85(3), 1781–1823.CrossRef Google Scholar

Farhi, E., and Werning, I. (2017). Fiscal unions. American Economic Review 107(12), 3788–3834.Google Scholar

Fornaro, L., and Wolf, M. (2020). Coronavirus and macroeconomic policy. VoxEU, CEPR Portal, 10 March. https://cepr.org/voxeu/columns/coronavirus-and-macroeconomic-policy Google Scholar

Gootjes, B., and de Haan, J. (2022). Procyclicality of fiscal policy in the European Union. Journal of International Money and Finance 120, 102276.Google Scholar

Henning, C. R., and Kessler, M. (2012). Fiscal Federalism: US History for Architects of Europe’s Fiscal Union. Brussels: Bruegel.Google Scholar

Kopits, G. (2016). The IMF and the euro area crisis: The fiscal dimension. IEO Background Paper No. BP/16-02/07, IMF Independent Evaluation Office, 8 July.Google Scholar

Kopits, G. (2017a). Toward a closer union in Europe: Elusive mirage or reality within grasp? In Costa Cabral, N. et al. (eds), The Euro and the Crisis: Future Perspectives for a Monetary and Budgetary Union. Cham: Springer, 339–355.Google Scholar

Kopits, G. (2017b). Managing the euro debt crisis. In Odor, L. (ed.), Rethinking Fiscal Policy after the Crisis. Cambridge: Cambridge University Press, 258–300.Google Scholar

Kopits, G. (2018). How could the Stability and Growth Pact be simplified? Economic and Monetary Committee, Brussels: European Parliament.Google Scholar

Orphanides, A. (2017). Fiscal implications of central balance sheet policies. In Odor, L. (ed.), Rethinking Fiscal Policy after the Crisis. Cambridge: Cambridge University Press, pp. 71–100.Google Scholar

Ryvkin, B. (2012). Saving the euro: Tensions with European law to protect the common currency. Cornell International Law Journal 45(1), 227–255.Google Scholar

Sinn, H. W. (2014). The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs. Oxford: Oxford University Press.Google Scholar

Sinn, H. W. (2018). The ECB’s fiscal policy. NBER Working Paper No. 24613.Google Scholar

Steinbach, A. (2020). The Next Generation EU – Are we having a Hamiltonian moment? EU Law Live, No. 23, 27 June.Google Scholar

Veron, N. (2016). The IMF’s role in the euro area crisis: Financial sector aspects. IEO Background Paper No. BP/16-02/10, IMF Independent Evaluation Office, 8 July.Google Scholar

Wyplosz, C. (2020). So far, so good: And now don’t be afraid of moral hazard. VoxEU, 4 June. https://voxeu.org/article/so-far-so-good-and-now-don-t-be-afraid-moral-hazard Google Scholar

Accessibility standard: Unknown

Accessibility compliance for the PDF of this book is currently unknown and may be updated in the future.