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Publishers Abstract:
This paper will analyze the evolution of the EU's multilevel system of fiscal and economic governance, and the way in which this system has sought to (partially) address the three main obstacles highlighted above, from the original design of the Economic and Monetary Union, to the sovereign debt crisis and the responses to it. The paper will argue that, if it were to address the three highlighted obstacles more fully, the European Union would face a crucial choice between two different models of fiscal integration: the surveillance model, where Member States continue to maintain all taxing power and where the EU has a corrective role as an enforcer of discipline, and the classic fiscal federalism model, where the EU acquires taxing power and its own independent sphere of fiscal authority, and thus its own fiscal tools for macroeconomic stabilization. The paper will discuss how a classic system of fiscal federalism -- i.e., where different fiscal functions and instruments are attributed to different levels of government -- could be articulated within the Union, and the problems that this would raise.
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