Blueprint for the European Fiscal Union: State of knowledge and Challenges

Almost 30 years after the launch of the European Economic and Monetary Union (EMU) project in the Maastricht Treaty (1992), budgetary and fiscal union now appears to be the next milestone for the European integration process. In other words, what kind of European Fiscal Union project should decision-makers spearhead? This paper proposes to define precisely what fiscal integration consists of and to draw up a survey of the fiscal federalism theory. The next step is to compare the different possible models of fiscal federalism that exist in practice in the world, and then identify the threats and challenges for the European model in order to be able to describe the main features the future European fiscal union will have to check. Thus, it would be desirable for the future European fiscal union to be characterized by a substantial transfer of “allocative” public spending, particularly in the area of support for growth and employment, and in the area of external relations, by the creation of a fiscal capacity for the euro zone allowing the introduction of automatic European budgetary stabilizers and to replace the current rule of fiscal discipline by a rule that is smarter and more credible in terms of sanctions.