What is a 'fiscal union'?
By Alberto Mingardi
The other day I attended a conference on the euro-crisis, and I questioned two of the speakers on what they meant for “fiscal union.” Sometimes, words become cozy, people use them rather liberally as they become fashionable, but we lose track of their true meaning.
The two economist I quizzed were both arguing in favor of a European fiscal union. Answering my question, economist A replied that he thought the European Union was more or less already a “fiscal union.” The euro as a common currency is still very young (it was sneaked into people’s pockets in 2001) and in a very short period of time Europeans soon developed a series of solidarity mechanisms. The combined effect of an independent ECB, the ESM (European Stability Mechanism) and the older EFSF (European Financial Stability Facility), and of fiscal rules (Six Pack) described the framework of an already existing de facto “fiscal union.” He added to this mix of policies the idea of a “banking union” and, specifically, uniform resolution procedures for banks. Such a “fiscal union” would ideally be governed by rules rather than by men, not least because of the heterogeneity of the EU member states.
Economist B held a very different point of view. For him, a fiscal union meant basically a European Finance Minister and, thus, centralization at the European level of a certain degree of public spending. The idea is that you need to go further than common budgetary rules on the spending side–and then, why not on the revenue side, too? Can you picture a fiscal union with a single finance minister, but with wide differentiation in tax rates among member states?
My impression is that economist B is right on what logically a fiscal union is, but that economist A is right on where to draw a line. The fact that they both used the very same words to mean different things is symptomatic of the state of the debate in Europe. If you say you do not want a fiscal union, you may be aligned with the deep rooted sentiments of the voters–but you disqualify yourself from the debate technocrats and elites are having.
But schizophrenic words may yet hold some surprise in store, particularly if different meanings are, actually, different translations, so to say. Can this have no political consequence whatsoever? It doesn’t take much imagination to recognize which of the two economists was from the North of the Eurozone–and which one from the South.