THE BALANCE BETWEEN FISCAL INTEGRATION, A FISCAL UNION AND FISCAL COMPETITION
THE BALANCE BETWEEN FISCAL INTEGRATION, A FISCAL UNION AND FISCAL COMPETITION

Summary/Abstract: The aim of this paper is to review the major driving points towards a fiscal union and its effects on fiscal integration and competition. Although the European Union is considered the pinnacle of economic, monetary and social unions, this is partially true. Even though the formation of a monetary union was a breaking point in the European integration process, the lack of a genuine fiscal integration seems to have a negative impact, especially when facing an economic crisis. Since the establishment of EMU the need to achieve a fully integrated union, including fiscal and budgetary policies has been remarked. Even if the Stability and Growth Pact and the Fiscal Compact are important steps, they do not offer enough support in maintaining sound public finances and in taking to the next level the fiscal integration degree. According to the literature, an enhanced fiscal integration leads towards a lack of fiscal competition, between the member states of EU. The pinnacle of the fiscal integration process in the European Union leans towards a single direction: the creation of a fiscal union. We believe that only by enhancing the EU through the fiscal integration, the European economy will reach new heights in economic growth, stability and resilience towards crises

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