The creation of the EFSF - such gripping drama

The FT has a fantastically well researched and sourced article on the events that led to the creation of the European Financial Stability Fund, "Dinner at the edge of the abyss", written by the great Tony Barber. Really good for anyone interested in the history of European integration and about what country stands for what in that debate.

SGP3: The European Commission initial proposals

The news report from EUobserver The official description provided by the European Commission: In General terms, Strengthening the SGP, The preventive and Corrective measures and Chronology and overview of the new framework of surveillance and enforcement (where they fail to mention the chaos of 2002-2005 and the SGP2 reform of 2005). Finally, here and here are the highlights and the arguments in favour from the European Commission at VoxEU.

European Fiscal Federalism (Part 4): Institutional Framework and Credible commitments

Until now, this analysis has completely ignored who should be in charge of this redistributive policy. We have agreed that it should be the EU running the show, but which institution should be responsible for this?

European Fiscal Federalism (Part 3): Pigouvian taxation, and redistribution - Externalities, mobile assets, and euro interest rates

So far, I’ve been describing the economic logic for fiscal federalism. However I have not qualified it. It's all nice and easy to argue that we need to tax the richest and subsidise the poorest, but how do you do this? Which pockets should the EU reach into and what should it pay for?

In the next lines I propose the following Euro-level fiscal tools : (1)Taxes on mobile factors that cause negative externalities, (2)an Income tax, and the maintenance of a (3)common education policy as well as a (4)common defence policy, with a tendency for expansionary military R&D expenditure during recessions. Finally I also argue in favour of (5)the establishment of an European Monetary Fund (EMF) to switch from cooperation to coordination of euro-area fiscal policies. This would be the best tool to keep and improve the theoretically good monitoring devices created by the SGP, while replacing its very ineffective legalistic procedures, in order to improve fiscal stability across the board.

I believe these are the necessary tools for the EU to minimise its risks of suffering from asymmetric shocks, while endowing it with the policy tools to deal with them, should they arise, as they inevitably will. They may however not be sufficient...