Is a separate eurozone budget a good idea?

Abstract

The sovereign debt crisis served to highlight the limitations of trying to use a Union budget in which all Member States participate to perform functions corresponding to a monetary union in which not all Member States participate. In this context, a debate has arisen about whether the Eurozone should rather have its own budget, separate from the Union budget. There are good arguments to support the view that a new budgetary capacity should be developed at European level to support the monetary union, but this paper defends the view that it is preferable to develop such a capacity within the Union budget, or, to the extent that this is not yet feasible, to keep it as closely aligned to the Union budget as possible. In this respect, the Commission’s latest EMU and MFF proposals are a welcome first step in seeking to pursue such an integrative approach, within the constraints of the current Treaties. Looking to the future, a European public finance convention could be considered to prepare more ambitious reforms, including targeted treaty revisions, for adoption in the 2020s.