The politico-economic debate on the formation of a European fiscal union

Abstract

In the continuously evolving landscape of EU politics and economics, the idea of a European Fiscal Union has emerged as a central and contentious topic of debate. The fiscal union envisions an ambitious plan of closer fiscal integration between Member States to complement the monetary and economic union. The formation of a fiscal union would go beyond the confines of a common currency and create a unified fiscal framework, which would entail the sharing of resources, harmonised fiscal policies, shared institutions and mechanisms for revenue and expenditure across Member States. Fiscal integration has become a subject of intense debate since the Sovereign Debt Crisis in 2010 and the Covid-19 pandemic in 2020. On one hand, the argument is that a deeper fiscal union would achieve greater economic stability, crisis resilience and longterm propensity for the EU by mitigating economic disparity. On the other side of the debate, concerns have arisen over the potential loss of national sovereignty, moral hazards and the difficulties of institutional and legal changes. The aim of this dissertation is to trace the development of the debate throughout this decade within the institutions and analyse the political positions of the political groupings in the European Parliament. It will also delve into the elements that make a fiscal union and whether existing EU policies already intersect with fiscal integration. The debate on the formation of a fiscal union is a multidimensional area that intersects with political ideologies, diverse economic policies and varying levels of willingness for further integration. Thus, this dissertation will include elements of economic theory and politics to create a comprehensive overview of the debate.