Reconciling insurance with market discipline

• Verfasst von: Dolls, Mathias [VerfasserIn]
• Verfasst von: Fuest, Clemens [VerfasserIn]
• Verfasst von: Heinemann, Friedrich [VerfasserIn]
• Verfasst von: Peichl, Andreas [VerfasserIn]
• Titel: Reconciling insurance with market discipline
• Titelzusatz: a blueprint for a European fiscal union
• Verf.angabe: Mathias Dolls, Clemens Fuest, Friedrich Heinemann and Andreas Peichl
• E-Jahr: 2016
• Jahr: June 2016
• Umfang: 22 S.
• Fussnoten: Gesehen am 22.08.2019
• Titel Quelle: Enthalten in: CESifo GmbHCESifo economic studies
• Ort Quelle: Oxford : Univ. Press, 2003
• Jahr Quelle: 2016
• Band/Heft Quelle: 62(2016), 2, Seite 210-231
• ISSN Quelle: 1612-7501
• DOI: doi:10.1093/cesifo/ifw004
• Datenträger: Online-Ressource
• Sprache: eng
• Sach-SW: Banks
• Sach-SW: Debt Management
• Sach-SW: Depository Institutions
• Sach-SW: Financial Institutions and Services: Government Policy and Regulation G28
• Sach-SW: Fiscal Policy E62
• Sach-SW: International Institutional Arrangements F55
• Sach-SW: Micro Finance Institutions
• Sach-SW: Mortgages G21
• Sach-SW: National Debt
• Sach-SW: Sovereign Debt H63
• Sach-SW: euro area debt crisis
• Sach-SW: European unemployment insurance
• Sach-SW: sovereign insolvency procedure
• K10plus-PPN: 1671843592

Abstract

This contribution develops a blueprint for a European fiscal union. We argue that a viable European fiscal union can be constructed without joint liability for public debt or a centralized government with a large common budget. Such a fiscal union should combine elements of market discipline with stabilization in case of asymmetric shocks. Our proposal addresses the shortcomings of most other reform designs, which fail to offer a solution for insolvent or non-cooperative euro countries. We suggest a design which combines limited fiscal insurance with an orderly procedure to restructure the debt of insolvent member states. We show that fiscal insurance and a sovereign insolvency procedure are no contradiction but, on the contrary, are mutually reinforcing. 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 risk that a fiscal capacity motivated as an insurance against transitory asymmetric shocks degenerates into a permanent transfer system. Moreover, we show that both elements promote the functioning of the European banking union and the new European fiscal governance.

Abstract

This contribution develops a blueprint for a European fiscal union. We argue that a viable European fiscal union can be constructed without joint liability for public debt or a centralized government with a large common budget. Such a fiscal union should combine elements of market discipline with stabilisation in case of asymmetric shocks. Our proposal addresses the shortcomings of most other reform designs, which fail to offer a solution for insolvent or non-cooperative euro countries. We suggest a design which combines limited fiscal insurance with an orderly procedure to restructure the debt of insolvent member states. We show that fiscal insurance and a sovereign insolvency procedure are no contradiction but, on the contrary, are mutually reinforcing. 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 risk that a fiscal capacity motivated as an insurance against transitory asymmetric shocks degenerates into a permanent transfer system. Moreover, we show that both elements promote the functioning of the European banking union and the new European fiscal governance.