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Bringing Macroeconomics into the EU Budget Debate: Why and How?

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  • SEBASTIAN DULLIEN
  • DANIELA SCHWARZER

Abstract

The EMU has been designed without an instrument for automatic fiscal stabilization on the European level. This article highlights the seriousness of this lacuna by new empirical data, which suggest that fiscal stabilization at the national level has also worked insufficiently. This situation will hamper the EU's efforts to achieve the targets set by the Lisbon Agenda: recent theoretical contributions suggest that a positive macroeconomic environment is a prerequisite for productivity growth and structural reform which form the centrepiece of the Agenda. There are thus strong economic arguments for rethinking the set‐up for fiscal stabilization policies in the EMU. We suggest three remedies for the underperformance of the automatic stabilizers: making EU expenditure sensitive to the cyclical situation of the recipient country, introducing an EU corporate tax upon the upcoming revision of the EU budget before 2013 and/or setting up a European unemployment scheme.

Suggested Citation

  • Sebastian Dullien & Daniela Schwarzer, 2009. "Bringing Macroeconomics into the EU Budget Debate: Why and How?," Journal of Common Market Studies, Wiley Blackwell, vol. 47(1), pages 153-174, January.
    • Handle: RePEc:bla:jcmkts:v:47:y:2009:i:1:p:153-174
    DOI: 10.1111/j.1468-5965.2008.01836.x
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    2. Étienne Farvaque & Florence Huart, 2016. "Drowned by Numbers? Designing an EU-wide Unemployment Insurance," CIRANO Working Papers 2016s-33, CIRANO.
    3. Pieter de Wilde, 2009. "Designing Politicization: How control mechanisms in national parliaments affect parliamentary debates in EU policy-formulation," RECON Online Working Papers Series 9, RECON.
    4. Leila E. Davis & Charalampos Konstantinidis & Yorghos Tripodis, 2017. "A proposal for a federalized unemployment insurance mechanism for Europe," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 14(1), pages 92-116, April.
    5. Pusch, Toralf & Kumpmann, Ingmar, 2011. "The Political Setting of Social Security Contributions in Europe in the Business Cycle," IWH Discussion Papers 4/2011, Halle Institute for Economic Research (IWH).
    6. Chortareas, Georgios & Mavrodimitrakis, Christos, 2016. "Can monetary policy fully stabilize pure demand shocks in a monetary union with a fiscal leader?," Economic Modelling, Elsevier, vol. 54(C), pages 463-468.
    7. Richard Bronk & Wade Jacoby, 2013. "Avoiding monocultures in the European Union: the case for the mutual recognition of difference in conditions of uncertainty," LEQS – LSE 'Europe in Question' Discussion Paper Series 67, European Institute, LSE.
    8. Richard Bronk & Wade Jacoby, 2013. "Avoiding monocultures in the European Union: the case for the mutual recognition of difference in conditions of uncertainty," Europe in Question Discussion Paper Series of the London School of Economics (LEQs) 7, London School of Economics / European Institute.
    9. Colombier, Carsten, 2013. "National debt brakes as a remedy for diverging economies in the European Monetary Union?," MPRA Paper 104742, University Library of Munich, Germany.
    10. Oliver Picek & Enno Schröder, 2017. "Euro area imbalances: How much could an expansion in the North help the South?," IMK Working Paper 180-2017, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    11. Sebastian Dullien, 2012. "Is new always better than old? On the treatment of fiscal policy in Keynesian models," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(0), pages 5-23.
    12. Colombier, Carsten, 2011. "How to consolidate government budgets in view of external imbalances in the Euro area? Evaluating the risk of a savings paradox," MPRA Paper 104741, University Library of Munich, Germany.
    13. Christoph Peatz, 2020. "Fiscal Rules in Good Times and Bad," IMK Working Paper 206-2020, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    14. Nazaré Costa Cabral, 2016. "Which Budgetary Union for the E(M)U?," Journal of Common Market Studies, Wiley Blackwell, vol. 54(6), pages 1280-1295, November.

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