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8 - Principles of Fiscal Federalism for the European Union

from Part II

Published online by Cambridge University Press:  07 April 2022

Brady Gordon
Affiliation:
University of British Columbia, Vancouver; Blake, Cassels & Graydon LLP
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Summary

Chapter 8 seeks to extract principles of fiscal federalism for EMU and determine what models of fiscal federalism will ‘work’ in the context of the constitutional boundaries of the European legal order. Chapter 8 first extracts a number of institutional determinants of fiscal discipline in a decentralized federal system: market discipline; hard budget constraints; fiscal symmetry; expenditure and revenue autonomy; and specific characteristics for credibly-designed fiscal rules. It then tests those determinates in operation through a comparative analysis of five federations selected using a ‘most similar cases’ and a ‘prototypical cases’ methodology: Germany, Switzerland, the USA, Canada, and EMU. Chapter 8 finds that from the perspective of fiscal federalism theory, the incumbent prescriptions for centralised EU ‘fiscal union’ are - quite simply and profoundly - wrong. Centralised fiscal governance never works in a decentralised federation without market discipline, and contemporary economists already find the new governance framework no more credible than its predecessor.

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Publisher: Cambridge University Press
Print publication year: 2022

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