For Europe, There Are No Shortcuts to Fiscal Union

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European Commission President Jean-Claude Juncker made clear in his State of the Union speech today that he wants more Europe, including an expanded euro zone club. That will require a degree of economic and financial integration Europe currently lacks, a Bloomberg View reported. The central question, with German elections nearly two weeks away, is whether Berlin will finally agree to the creation of some form of fiscal union, which would help member states deal with economic shocks before these turn into full-fledged crises. One optimistic take is that this question may not matter all that much. Even if Germany continues to refuse to pool tax revenues to fund measures such as a joint unemployment benefit scheme, there are other ways to ensure that risks are spread more evenly across the euro zone. In particular, the speedy completion of the banking union and the creation of the EU's capital markets union can ensure that private investors from across the monetary union take a hit when a country suffers a shock. So long as governments do not step in to cover these losses, the argument goes, the euro zone can thrive without a fiscal union. Read more.