The euro-zone by now has revealed its weakness and its main weakness is that we don’t have a federal fiscal capacity. So what we have been proposing in a recent policy brief
with Benedicta Marzinotto and Andre Sapir is to create exactly that federal fiscal capacity in other words the possibility to tax at a federal
level so at a euro zone level to tax citizens or corporations to contribute to a crisis management
and resolution fund but also to have the necessary resources
to help exstop the financial and banking system if this becomes necessary. These are the two central elements in terms of the financing of a fiscal union. But also I think some of the Germans and French are calling for a whole system of checks and balances how member states deal with their finances sanctions also. Would that be helpful? Yes so our proposal also includes a conditionality that needs to be imposed as soon as you create mechanisms for
assistance to other countries as well as mechanisms
to help exstop and finance financial system you do need to put in
place a system which has stronger influence on national budgets
but also on supervision of banks so what we’re proposing is exactly that
we propose a veto ride on national budgets by a euro zone finance
minister that needs to be legitimized by parliament at the euro zone level and in addition we do propose to move
financial supervision to a euro zone level giving the euro zone financial
supervisory authority direct intervention rights into banks But I can already hear some European capitals screaming loss of sovereignty hearing those proposals isn’t that a big risk that politically you’re going into a very controversial territory? Yes, this is of course very
controversial but on the other hand moving towards a fiscal union with lots
of liabilities and lots of corresponsibilities implies also giving up sovereignty so it’s quid pro pro How quickly does this have to happen in
view of just how rapidly and frighteningly the euro zone debt crisis now is is growing? Well we are proposing this to happen over a medium run so it needs to be a political declaration that is establishing this relatively quickly but of course the implementation of that
process will take some time but once you have come to an agreement
in principle to move to such a a new fiscal union you can give the current institutions much
more scope to act and intervene so ultimately the ECB could even in a
position to backstop the financial system and to also help on the government bond market if the ECB knows that the euro zone is moving
towards a fiscal union.