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Some economists argue that the monetary union of the European Union should be followed by further fiscal integration. The wikipedia page lists only advantages of such fiscal union, but what would be possible negative effects if a fiscal union was created?

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    This question is a bit broad, and would depend on the detail of the said fiscal union. – Joe C Dec 30 '20 at 20:32
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    Please don't use comments to answer the question. – Philipp Dec 30 '20 at 20:52
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    Fiscal union is a vague term that means different tings to different people ; read the following (esp. p. 7) instead of the wiki article ec.europa.eu/info/sites/info/files/dp013_en.pdf And then you'll see why this is such a broad question. Maybe you can pick some of the aspects bullet-ed on that page and ask about those individually. – Fizz Dec 31 '20 at 0:33
  • ibid (esp. p.3): ceps.eu/wp-content/uploads/2017/01/… – Fizz Dec 31 '20 at 0:47
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One negative factor would be resentment from the population of stronger EU members. IN the Image below we can see that several countries are paying rather large amounts keeping this Union alive while the Southern nations receive money for developing their countries.

The problem with this is, there is not really a brotherly bond anymore that unites us so the population (especially now in times of crisis) is wondering why their nation is handing out money to the EU to help other nations while their own country is not able to fix their own financial problems. Take for example the Greece crisis in which German tourists were attacked because "their government did not help enough to help Greece" this left a sour taste in the mouths of the German population. And there are several other incidents in which the southern European nations criticize the the "low" amount of financial support they are getting.

This causes a sentiment amongst the Northern European people of "Don't bite the hand that feeds you". A lot of Anti-EU political parties use this as a platform for their election campaigns, and in most nations those anti-Eu parties have been growing in strength over the years (With suggestions of splitting the EU up in a Northern and Southern Union).

If the EU would reduce their members sovereignty any further or entangle their financial systems even further you would have two possible outcomes.

A: Incase the contribution needed to support is done on a flat amount per person the southern nations get angry because they have to pay more money relative to what the north has to pay seeing they got an on average lower income.

B: Incase the contribution needed to support this is done percentage based the Northern nations would get angry because they have to pay more per person seeing they got a higher income and are "punished" for being successful while the nations that don't have things in order get rewarded with being bailed out.

TL:DR:

The cultural and financial differences combined with some hostility towards each other would make further financial entanglement a ticking time-bomb that (mainly the Northern) nations could not sell to it's people.

A practical example would be the Eurobond solution tot he Corona crisis, in which the EU would create a collective debt instead of an individual one for each nation. Financially stronger nations like The Netherlands, Austria ,Germany and so on opposed it because they feared that they would be the ones who would actually pay the majority of the debts in the long run while the southern nations would reap the benefits. And this is the overall fear for a fiscal union... that it would effectively be a forced funnel of finances from the stronger nations to the South, which some amongst the populace already comparing it to communism and the EU as the spiritual successor to the USSR.

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    You're most definitely right about the sentiment and self-understanding of, e.g., Germany or the Netherlands, and how toxic ideas like Eurobonds can be politically in those countries. The answer could however be improved by taking a more distanced or academic view towards this sentiment. It's not true that the net contributions are very large and net contributors have benefited more than most of EU integration and the creation of the euro. By contrast, in recent years, it's Greece that has consented enormous efforts for the sake of preserving the eurozone. – Relaxed Dec 30 '20 at 23:28
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    Maybe if you read the wiki page first, which says "A fiscal union does not imply the centralisation of spending and tax decisions at the supranational level." you'd see why your answer is off key. What you're arguing here against is a "transfer union". – Fizz Dec 31 '20 at 0:13
  • @Relaxed effort and results are two different things though. Ask a random Dutch or German person what they can tell about Greece and the only answer you will get is their old gods, vacation spots and them costing us millions we never will see again. My argument is based on how the people would feel towards it, most people won't take the time to look up the facts and will only view it at a surface level which displays the southern EU nations as "leeches". – A.bakker Jan 1 at 10:59
  • @Fizz What I am arguing against is what the public would probably perceive. Take the EU trade deal with the Ukraine a few years ago. In my country there were protests and a referendum against it because people were afraid it was going to be a stepping stone for (another "poor" country) the Ukraine entering the EU while on paper the trade deal had nothing to do with it. My argument is not about what will happen, but rather what would a large chunk of the population would perceive and how they would respond. – A.bakker Jan 1 at 11:02
  • @A.bakker That's true but it depends on how you define the results. If the goal was keeping the EU and eurozone whole while shielding the institutions in the more powerful countries from assuming any responsibility for what happened or facing the consequences of their decisions, then it's a success. What was demanded of Greece (balancing budgets by slashing spending, regaining competitivity in a deflationary context while tied to countries keeping their inflation too low) was bound to fail. – Relaxed Jan 1 at 16:56
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Loss of experimentation and settling at possibly a less-than-best equilibrium point.

Economics isn't an exact science. Different countries have different attitudes, at different times on how to run things.

80s France tried nationalization of big businesses under Mitterand. Later on, "national champions" became the norm. Sweden has had extremely heavy income taxes in the past. Greece... didn't collect taxes much. Ireland on the other hand tried to boost its economy by having very low corporate taxes.

Forcing everyone to conform to the same fiscal framework risks pursuing the policies that are the most popular, or pushed by the most influential EU member states, not necessarily the best. Yes, that way France would not need to compete against Ireland's tax system when trying to attract FDI. Is alignment with French policies really a good outcome? Not judging by France's economic health it isn't.

Better to leave a higher degree of flexibility to citizens in how they want to run their countries. Experimentation will happen and best practices might be broadly adopted.

Additionally, as Brexit has shown, real or perceived loss of sovereignty can quickly sour support for the EU.

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  • The "nice" thing about this argument is that it doesn't need to even define "fiscal union". I mean yours is a generic argument against any further EU integration in any domain ("it will piss off the sovereignists"). – Fizz Dec 31 '20 at 0:51
  • @Fizz sovereignty issues are not the primary concern in my response and you know it. The "nice thing" about your snarky comment, citing, A fiscal union does not imply the centralisation of spending and tax decisions at the supranational level. on the other answer is that you did not bother reading down to the bottom of the page, where it says If fiscal union were to happen, national expenditure and tax rates would be set at European Council level.. – Italian Philosophers 4 Monica Dec 31 '20 at 1:19

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