EU Fiscal Capacity

Abstract

Abstract This book purports to analyse how the Covid-19 pandemic, and now the war in Ukraine, have affected the euro, and the European Union (EU) constitutional architecture of economic governance—what is technically known as Economic and Monetary Union (EMU). Taking an EU law and policy perspective, the book focuses specifically on fiscal capacity, that is, a centralized budget, funded by own resources, to undertake counter-cyclical policies in case of asymmetric economic shocks. The book explores how the pandemic led to the emergence of an infant EU fiscal capacity, via the Next Generation EU (NGEU) Recovery Fund, and reflects on the possibilities of retaining it as a permanent feature of EMU in the future. The book argues positively that NGEU constitutes for all practical purposes a fiscal capacity for the EU, which goes a long way towards overcoming the original asymmetry of EMU—as it had long been called before the pandemic. Nevertheless, the book also argues normatively that the EU needs a permanent fiscal capacity beyond the pandemic—particularly in light now of the explosion of the war in Ukraine. On the basis of a comparison with the fiscal federalism system of the United States, the book underlines the paradigm change brought about in EMU by NGEU, but also makes the case to retain a fiscal capacity as a permanent feature of the EU, and to back it up with proper constitutional reforms, as recently also recommended by the Conference on the Future of Europe.