Bringing Macroeconomics into the EU Budget Debate: Why and How?

Abstract

The EMU has been designed without an instrument for automatic fiscal stabilization on the European level. This article highlights the seriousness of this lacuna by new empirical data, which suggest that fiscal stabilization at the national level has also worked insufficiently. This situation will hamper the EU's efforts to achieve the targets set by the Lisbon Agenda: recent theoretical contributions suggest that a positive macroeconomic environment is a prerequisite for productivity growth and structural reform which form the centrepiece of the Agenda. There are thus strong economic arguments for rethinking the set-up for fiscal stabilization policies in the EMU. We suggest three remedies for the underperformance of the automatic stabilizers: making EU expenditure sensitive to the cyclical situation of the recipient country, introducing an EU corporate tax upon the upcoming revision of the EU budget before 2013 and/or setting up a European unemployment scheme.

Ex ante vs. ex post: the trade-off between partisan conflict and visibility in debating EU policy-formulation in national parliaments

“…The pro-anti dimension is operationalized as claims in favour of an increase of the size of the budget or total revenues (pro-European) vs. decrease in size of the budget (anti-European) (de Wilde 2009: 4 -5). Leftright is operationalized as claims in favour of more redistribution from winners to losers in the internal market (left), to claims in favour of more investment in competitiveness and growth (right) (Dullien and Schwarzer 2009). Since a claim has to be made in public according to the definition above, visibility is simply operationalized as the amount of claims made.…”

Political Science and the Eurozone Crisis. A Review of Scientific Journal Articles 2004–15

“…Germany is subject of a case study dealing with the country's willingness to provide financial assistance to crisis countries (Bonatti and Fracasso, 2013). Instruments for (automatic) financial stabilization are discussed under the construction narrative (Dullien and Schwarzer, 2009;Mourlon-Druol, 2014;Steinbach, 2015), but there is only one article especially dedicated to a proposal for Eurobonds (Hild et al, 2014). Eurobonds are mentioned in a number of other articles as well, but only in passing.…”

A proposal for a federalized unemployment insurance mechanism for Europe

“…One direction for reform is a set of fiscal transfers to cushion adverse asymmetric shocks to EMU countries (Dullien/Schwarzer 2009). Theoretical support for fiscal transfers in the European context is found in optimum currency area theory (Mundell 1961;Kenen 1969;Krugman 2012), and also more recently in the context of surplus-recycling mechanisms targeting systematic trade imbalances across eurozone countries (Varoufakis 2011).…”