Bargaining the Euro: Making an EU Fiscal Union Politically Acceptable

Filipa Figueira and Raphael Espinoza

European Review, 2023, vol. 31, issue 3, 252-272

Abstract: An EU Fiscal Union is being discussed as a way to avoid future euro-crises and guarantee the stability of the euro. So far, however, it has proved politically impossible, as EU countries are unwilling to give up their sovereignty on fiscal policy. This article develops a bargaining model that sheds light on how fiscal pooling could become politically acceptable. The model differentiates between the ‘South’ (net beneficiaries) and the ‘North’ (net payers). We find that fiscal pooling should be done via a combination of the fiscal instruments with the highest fiscal multipliers. Instead of a single Fiscal Union, we therefore propose a combination of fiscal pooling instruments which, together, add up to the sufficient level of fiscal integration.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:cup:eurrev:v:31:y:2023:i:3:p:252-272_3

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