The Fiscal Union and the Eurozone Debt Problem

Ionela Bălţătescu

Revista de Economie Mondiala / The Journal of Global Economics, 2012, vol. 4, issue 3

Abstract: The present paper summarizes the main characteristics of the Eurozone institutional setup and the related economic and political incentives that drive Eurozone governments to increase their public debts, disregarding the limits agreed in the European treatises. The first part of the paper contains a review of the Eurozone institutional setup and of the incentives it creates for Eurozone member states to increase their deficits and public debts. The second part of the paper carries out a short review and criticism of the main strategies and policy tools to fight Eurozone debt problem: ECB bond buying, EFSF/ESM leverage, Eurobonds and Euro-TARP. The main conclusion of the paper is that establishing a fiscal union in EU does not solve by itself the public debt problem of Eurozone member states if the institutional mechanism of debt accumulation, debt rollover and risk socialization are not dismantled.

Keywords: public debt; fiscal union; Eurobonds; ECB bond buying; Euro-TARP (search for similar items in EconPapers)
JEL-codes: H6 H63 H69 H7 H74 H77 H81 H87 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:iem:journl:v:4:y:2012:i:3:id:2822000008747099

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