On Organizational Forms for Fiscal Integration in the EU

The term “fiscal integration” is often strained at the expense of accuracy of its usage. It is employed when keeping in mind: (1) centrally coordinated constraints on national fiscal deficits (Maastricht model), (2) cross country sharing of macroeconomic risks (transfer union model) or, alternatively, (3) regional budgetary integration (federalist model). The parent Maastricht model is based more on the principles of national self-liability, no-collective bail-out and non-monetization of public debt. The transfer union, in its turn, bases itself on debt mutualization, risk sharing, transnational redistribution and the monetization of public debt. In the meantime, the economic and financial crisis revealed a number of weaknesses in the Eurozone governance, leading, in particular, to the quasi-fiscal actions of the ECB, normally mainly responsible for monetary policy, and a revision of EU policy structures in order “rescue’’ the euro. On the whole, the situation moved away from the Maastricht model in the direction of acquiring more resemblance to a transfer union. In general the idea of regional integration presupposes a rectilinear, one-way progression of the EU towards greater organizational complexity, interpreted as excrescence of centrality (for which read: supranationality). In contrast to that, in the proposed paper (dis)integration is understood as an ability of a compound whole to (better or worse) stand against external and internal challenges than it is affordable for its elements, if taken on a standalone basis. With such an approach, adopted in this case from the organisational theory by Alexander Bogdanov (Malinovsky), we can assume a possibility of decentralized (fiscal) integration or, quite to the contrary, of centralized disintegration. In the absence of “full” fiscal union, a viable form of decentralized integration, instead of becoming a doom for the Eurozone, could open a way to a system of separate (already existing or debatable) elements of fiscal union, with distributed responsibility for sovereign debts – if accumulated in defiance of fiscal discipline. Presumably, European fiscal integration could end being more degressive in that case than it is usually deemed acceptable. But in this form fiscal policy decisions in the EU would also retain or restore their democratic credentials. A conception of wholism and equilibrity was elaborated by Bogdanov at the beginning of the XXth century and included ideas of effective rapport between centralization and decentralization. The problem with the EMU today is not so much that it is asymmetric, but that the Eurozone system is not stable enough due to its two opposite parts not being balanced properly. As a result asymmetric behavior, rather than asymmetric economic shocks, appears to be at the root of recent troubles. To reverse this unfavorable situation, the power of taxation should be legitimized and controlled in the EU by adequate democratic representation at both the European and the national levels. This paper attempts to demonstrate that elements of degression are important from an organizational point of view: they can help to secure the co-development of more ‘plastic’ forms of surveillance, redistribution and limited fiscal capacity, originating from supranational institutions.