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European Stabilization Policy After the Covid-19 Pandemic: More Flexible Integration or More Federalism?

Author

Listed:
  • Andersson, Fredrik N. G.

    (Department of Economics, Lund University)

  • Jonung, Lars

    (Department of Economics, Lund University)

Abstract

Crises are a major driving force behind cooperation in the European Union. This holds also for monetary and fiscal policy. During severe crises, cooperation has been enlarged and intensified. The recent covid-19 pandemic is a clear example of this pattern. The pandemic has had huge impact on the conduct of stabilization policies in the EU. Public debt has grown rapidly in many EU member states. The ECB has carried out a highly expansionary monetary policy. In this paper, we discuss the implications for the EU of a move towards increased fiscal federalism following the pandemic. First, the role of crises as a driver of political change is analysed. Next, we examine in greater detail, the effect of crises on the design of stabilisation policies in the EU since the introduction of the euro, the common currency. Finally, we discuss the significance of the recent pandemic-induced steps towards increased federalism for the EU. We raise the question as to whether this is a desirable path for the future of European cooperation.

Suggested Citation

  • Andersson, Fredrik N. G. & Jonung, Lars, 2022. "European Stabilization Policy After the Covid-19 Pandemic: More Flexible Integration or More Federalism?," Working Papers 2022:11, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2022_011
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    References listed on IDEAS

    as
    1. Kollmann, Robert & Pataracchia, Beatrice & Raciborski, Rafal & Ratto, Marco & Roeger, Werner & Vogel, Lukas, 2016. "The post-crisis slump in the Euro Area and the US: Evidence from an estimated three-region DSGE model," European Economic Review, Elsevier, vol. 88(C), pages 21-41.
    2. Andersson, Fredrik NG, 2016. "A Blessing in Disguise? Banking Crises and Institutional Change," World Development, Elsevier, vol. 83(C), pages 135-147.
    3. Mr. Luc Laeven & Mr. Fabian Valencia, 2018. "Systemic Banking Crises Revisited," IMF Working Papers 2018/206, International Monetary Fund.
    4. Daron Acemoglu & James A. Robinson, 2021. "Culture, Institutions and Social Equilibria: A Framework," NBER Working Papers 28832, National Bureau of Economic Research, Inc.
    5. Sonja Opper & Fredrik N. G. Andersson, 2019. "Are entrepreneurial cultures stable over time? Historical evidence from China," Asia Pacific Journal of Management, Springer, vol. 36(4), pages 1165-1192, December.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Felix Roth & Lars Jonung & Aisada Most, 2024. "COVID-19 and public support for the Euro," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(1), pages 61-86, February.

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    More about this item

    Keywords

    Monetary policy; fiscal policy; fiscal rules; stabilization policy; European Union; ECB; crises;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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