How far will we realistically move towards fiscal federalism?
24 February 2014 5:00 pm
Thomas Wieser, President of the Euro Working Group
wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)
The debate about the sequencing of political and monetary union (MU) in the European Union goes back to the 1970s, and was only conclusively ‘settled’ with the Maastricht Treaty. The German ‘Krönungstheorie’ – that MU could only come about after political union had been achieved – was abandoned. The specific political context of the late 1980s and early 1990s played a role. The debate has been rekindled as a consequence of the recent crisis: The issue of fundamental reform of the euro area's fiscal governance is and will remain part of the debate of the relationship of MU and its Member States. At the same time the sovereign contingent liabilities through the interlinkages between bank balance sheets and the liquidity (sometimes solvency) of their sovereign have starkly shown the degree of fiscal interdependence in a Monetary Union. Therefore, progress towards a Banking Union (BU) has been swift in recent months. I will argue that for BU to be complete would require progress towards fiscal federalism. This in turn would need to be based on constitutional changes in all participating Member States, and the European Union. For the foreseeable future, MU will therefore be unlikely to be complemented by progressive fiscal burden sharing.
Thomas Wieser is the Brussels-based President of the Euro Working Group, and Chairman of the European Union's Economic and Financial Committee. Prior to that he was Director General for Economic Policy and Financial Markets of the Austrian Ministry of Finance, Vienna. He studied economics in Innsbruck and the US (University of Colorado) and went on to the Institute of Advanced Studies in Vienna, working mainly in the field of mathematical economics. After working in the banking sector in Austria he was an economist for EFTA in Geneva from 1986 onward. From 1989 he worked in a variety of positions in the Ministry of Finance with responsibilities for economic policy, financial markets, international and development issues. He has held a number of international functions, for example as Chair of the OECD Committee on Financial Markets, and as Chairman of the EFC from 2009 to 2011.