Working paper de l'OFCE
Paris : OFCE
Working paper de l'OFCE : 2013-06
EU fiscal policy, EU governance
The economic crisis which started in 2008 led to a strong rise in public debts. The sovereign debt crisis in euro area southern countries breached the unity of the euro area and weakened the ‘single currency’ concept. The paper shows that this situation is not due to a lack of fiscal discipline in Europe, but to drifts in financial capitalism and to an inappropriately designed euro area economic policy framework.Public debts homogeneity needs to be resettled in Europe. European public debts should become safe assets again, and should not be subject to financial markets’ assessment. European Member Statesshould not be requested to pay for past sins through austerity measures, and should not strengthen fiscal discipline through rules lacking economic rationale. The paper deals with recent proposals which have been made to improve euro area governance (redemption fund, Eurobonds, public debt guarantee by the ECB). The paper advocates for a full guarantee of government bonds for the Member States who commit to an economic policy coordination process, which should target GDP growth and coordinated reduction of imbalances.