Friday, April 15, 2016
Maestro B (DoubleTree by Hilton Philadelphia Center City)
Many scholars argue that only a fiscal union, with European own resources - a power to tax, could solve structural problems of the EMU. In arguing for the need of such fiscal union, those scholars often make comparisons with other successful monetary unions. There are very few studies, however, on how such a fiscal union emerges. This paper helps to fill this gap by showing that the emergence of the power to tax of the central government (i.e. of the fiscal union) is a result of a sovereign debt crisis at the state level. In order to prove my claim, I analyse the fiscal history of the early US, to demonstrate how the institutional flaws of the Articles of Confederation, mainly the central budget based on contributions from the states, led to sovereign debt crisis on the state level, which triggered taxpayers’ revolt in 1786/1787. This fiscal crisis, in turn, was a single most important reason for granting the federal government power to tax. This analysis is complemented with the analysis how the EU developed its fiscal authority, with the surveillance mechanisms over the budgets of the member states. In this way, the EU went for a solution that American Framers wanted to avoid - coercing the states in a delicate matter of fiscal policies by using a threat of a financial sanctions. The paper concludes by presenting the lessons that the EU can learn from US experience in creating a fiscal union.
