The European Union
The issues surrounding the implementation of the European Union’s plan to implement a fully fledged fiscal union has highlighted fundamental problems within the Union. Back in October 2012 the Germans led a drive to establish a fully fledged fiscal union in an effort to fix the Euro crisis. Nearly a year on and little has been done. This highlights the lack of pace in the European Unions policy implementation mechanisms. Recent reports suggest that the Eurozone grew ever so slightly in the last quarter however this could possibly have been better had the EU implemented the policies more efficiently. The ECB will become the Eurozone bank supervisor in 2014, so it is looking like a long and phased implementation for this fully fledged fiscal union.
The fully fledged fiscal union in the EU
The thinking behind the implementation of a fiscal union is to break the vicious circle between sovereign debt and bank debt which has been the cause of the present Eurozone crisis.
The fiscal union will benefit smaller EU countries such as Ireland who have a high debt to GDP ration. For example in the US if there is a disaster such as the effects of a hurricane, the federal government can issue emergency funding for that region to rebuild which is not currently available in EU countries such as Ireland. The fully fledged fiscal union therefore should ease future economic shocks within the European Union and will have mechanisms in place for future instability and/or further banking crises. The union will certainly benefit stricken bailout countries Ireland, Portugal, Spain, Cyprus and Greece. Further debate surrounds the benefits to the larger European Union countries such as Sweden. The Swedish finance minister argued that the fully fledged fiscal union would do very little to solve the European problems and would in turn undermine the EU.
The problem and benefit of an EU fiscal union
The debate over the loss of sovereignty over the issue rumbles on within certain EU countries, however the varying degrees of such will most definitely be lost to get the policy up and running. By entering the EU countries do give up a portion of their sovereignty. Perhaps giving up more of their sovereignty is a small price to pay to get out of the dark hole that the European Union is in at the moment. Greater supervisory powers for the European Central Bank should in theory prevent future Crises.
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