Fiscal Transfers and Risk Sharing in the Eurozone

Johannes Kabderian Dreyer () and Peter Alfons Schmid ()
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Johannes Kabderian Dreyer: Roskilde University (RUC), ISE
Peter Alfons Schmid: FOM University of Applied Sciences

Chapter 2 in Optimal Currency Areas and the Euro, Volume III, 2026, pp 17-43 from Springer

Abstract: Abstract This chapter reviews the literature on fiscal transfers as a mechanism for risk sharing in the Eurozone (EZ). In a monetary union whose members lack independent monetary policies, fiscal federalism is necessary to mitigate asymmetric shocks. The chapter uses existing literature and comparisons with other fiscal federations to discuss the current limitations of the EZ. The currency union lacks robust stabilization tools that can be observed in interregional fiscal systems of established federal states (e.g., United States, Canada, Germany, and Switzerland). This calls for the development of a permanent and automatic mechanism of fiscal transfers that can preserve macroeconomic stability and resilience.

Keywords: Eurozone; Literature review; Fiscal transfers; Fiscal federalism; Risk sharing (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-032-12903-1_2

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DOI: 10.1007/978-3-032-12903-1_2

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