Prospects for a euro-area budget: an analytical outline
In a reflection paper intended to generate debate among euro-area governments, the European Commission has put forward ideas on what could be done to deepen the Economic and Monetary Union by 2025. One of the ideas outlined by the Commission is the creation of a euro-area budget.
This article reviews the key issues that are relevant in the discussion on establishing such a budget; outlines the possible functions of such a budget, such as incentivising structural reforms or ensuring macro-stabilisation; and discusses the issues of size, funding, moral hazard and governance, while touching upon the role of non-euro-area member states.
The article concludes with the assertion that the answer to this question is essentially political in nature and could constitute an example of how member states are ready to integrate further, while giving non-euro-area member states the opportunity to participate.