Today Europe finds itself in a crisis that casts a dark shadow over an entire generation. The seriousness of the crisis stems from one core political contradiction at the heart of the European project: namely, that what urgently needs to be done is also extremely unpopular and therefore...

Using an estimated large-scale New-Keynesian model, we assess welfare and business cycle consequences of a fiscal union within EMU. We differentiate between three different scenarios: public revenue equalisation, tax harmonisation and a centralised fiscal authority. Relative to the status quo,...