The Resource Federalism and the euro crisis

Federalism and the euro crisis

Federalism and the euro crisis
Federalism and the euro crisis
This contribution deals with the legal and institutional problems raised by the operation of the common currency in the euro Member States, and in particular with the legal framework needed to resolve the problems created by the currency crisis. The theoretical basis for the solution of these problems is sought in principles of fiscal federalism and in classical economic theory of public finance. In looking for solutions currently existing institutional mechanisms of economic and budgetary coordination in the EU are analysed. Account is taken of the facts of taxing and spending in the EU and in the individual Member States. The mechanisms of multilateral surveillance and excessive deficit spending are discussed. The impact of the volume and the structure of the EU budget is analysed in detail and compared with the impact of the national budgets of the single Member States. From this institutional and factual analysis an intermediary conclusion is formulated that the old institutional mechanisms are inadequate to successfully operate a monetary union with a common currency. Potential solutions in the form of a full federal system and complete tax harmonisation are then discussed, to conclude that the first solution is not realistic and the second does not work. A minimal solution is proposed for a new and independent euro authority to exercise strict budgetary control in normal times and to take direct control of economic and budgetary reform and financial assistance in times of crisis. The powers of such euro authority are compared to the powers provided in the newly proposed package on economic governance and the draft treaty on the European Stability Mechanism that are under discussion. The question of how to integrate these reforms in the existing European treaties is addressed. Finally some amendments are suggested to improve the efficiency of the EMS in times of crisis, such as qualified majority voting and unlimited financial support by the ECB
Citation source
In: World tax journal. - Amsterdam. - Vol. 3 (2011),
Vanistendael, F.J.G.M
Geographic coverage
European Union
Language note
  • fiscal federalism
  • public finance
  • harmonization of tax
Federalism and the euro crisis

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