Fiscal integration does not have to be complete: a unitary fiscal system for a continent as diverse as Europe is neither desirable nor feasible. However, “we view a deepening of fiscal risk sharing mechanisms as a prerequisite for a workable Euro area.” the Team notes.
While still falling foul of the benchmarks established in the Maastricht Treaty, at least prima facie the consolidated public finances of the Euro area compare favorably with those of the US, the UK or Japan. “Yet such consolidation is a statistical artifact: it has no economic or political basis. And as such, we have seen over the past few years, the fiscal stability of the Euro area as a whole is determined by the fiscal strength of the weakest of its constituent parts.” they point out.