Reconciling insurance with market discipline: a blueprint for a European fiscal union


Dolls, Mathias ; Fuest, Clemens ; Heinemann, Friedrich ; Peichl, Andreas


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URL: https://ub-madoc.bib.uni-mannheim.de/39489
URN: urn:nbn:de:bsz:180-madoc-394892
Document Type: Working paper
Year of publication: 2015
The title of a journal, publication series: ZEW Discussion Papers
Volume: 15-044
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: H87 , H12,
Keywords (English): Sovereign insolvency procedure , European unemployment insurance , euro area debt crisis
Abstract: This contribution develops a blueprint for a European fiscal union. The proposal addresses the shortcomings of most other reform designs which do not offer a solution for insolvent or noncooperative euro countries. We suggest a design which combines fiscal insurance with an orderly procedure to restructure the debt of an insolvent euro member. We show that fiscal insurance and a sovereign insolvency procedure are no contradiction but, on the contrary, mutually enforcing: An effective fiscal insurance helps to limit the stability risks involved in the implementation of an insolvency regime for sovereigns. And vice versa, a well-defined insolvency procedure reduces the danger that a fiscal capacity motivated as an insurance against transitory asymmetric shocks degenerates into a permanent transfer system. Moreover, we show that both elements are a helpful complement for the functioning of the European banking union and the new European fiscal governance.

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Dolls, Mathias ; Fuest, Clemens ; Heinemann, Friedrich ; Peichl, Andreas (2015) Reconciling insurance with market discipline: a blueprint for a European fiscal union. Open Access ZEW Discussion Papers Mannheim 15-044 [Working paper]
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