Fiscal integration of the monetary union – the solution against fragmentation

Irene Ioana Drăghici, Laurențiu Mihai Tănase and Robert Ștefan Uricaru
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Irene Ioana Drăghici: Bucharest University of Economic Studies, Romania
Laurențiu Mihai Tănase: Bucharest University of Economic Studies, Romania
Robert Ștefan Uricaru: Bucharest University of Economic Studies, Romania

Theoretical and Applied Economics, 2023, vol. XXX, issue Special, Summer, 208-214

Abstract: Lack of faith in national debt sustainability and country-financial market fragmentation are frequently two sides of the same coin in a monetary union. With the start of the global financial crisis in 2007, the fragmentation has significantly expanded, thus the effectiveness of interest rate pass-through has become more heterogeneous across euro-area countries, making single monetary policy more challenging. Since the start of the COVID-19 pandemic, financial fragmentation was overturned by a set of European Central Bank monetary policy expansionary measures and by the EU’s decision to implement a fiscal capacity centered on temporary Support to mitigate Unemployment Risks in an Emergency (SURE) and the program of the Next Generation EU (NGEU). Our aim in this article is to examine financial market fragmentation in the euro area and discuss solutions on how to reduce it.

Keywords: fragmentation; next generation EU; fiscal integration; monetary union. (search for similar items in EconPapers)
Date: 2023
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