Fiscal Capacity for A True Fiscal Union – A Change of Heart?

The new EU economic governance that transpired in the aftermath of the two economic crises provided stronger safeguards for the EU economy, but also demonstrated to be stunted enough to accommodate shocks of a larger magnitude. The following COVID-19 crisis thus increased the pressure of establishing a fiscal capacity at the EU level and completing the EMU. Hence, this research attempts to capture all the relevant shifts in the EU fiscal policy-making since any move towards an enhanced fiscal (dis)integration can hint a change of heart concerning common fiscal policy. The shifts are defined as upward, nil or downward. Closely related, the paper also examines the framework and practical aspects of the European Commission’s new instrument Next Generation EU. It finds that, in its current format, this tool cannot be equated with a genuine fiscal capacity of a true fiscal union.