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...

This contribution develops a blueprint for a European fiscal union. The proposal addresses the shortcomings of most other reform designs which do not offer a solution for insolvent or noncooperative euro countries. We suggest a design which combines fiscal insurance with an orderly procedure to...

There is a growing empirical literature studying whether fiscal rules reduce borrowing costs. Nevertheless, it remains an open question whether these rules are effective genuinely or just because they mirror fiscal preferences of politicians and voters. In our analysis of European bond spreads,...

The economic situation in the euro area continues to be weak. In the course of 2003, real GDP has only stagnated. Several factors prevented the expected recovery to materialize. Last year’s collapse of stock prices dampened activity, so did the high oil price. In addition, the uncertainty in...

In this paper we provide empirical evidence documenting the nature of the Eurozone's fragility. We find that during periods of turmoil, financial markets have tended to impose strong programs of austerity on member countries of the Eurozone. This confirms the evidence we found in a previous...

The recovery in Euroland has started at the beginning of this year but it has remained rather moderate. Real GDP increased at an annual rate of less than 1½ percent during the first half of 2002. Capacity utilization has declined further and unemployment continued to go up. While exports have...