Fiscal union

Fiscal union

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Fiscal union is the integration of the fiscal policy
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....

 of nations or states. Under fiscal union decisions about the collection and expenditure of taxes are taken by common institutions, shared by the participating governments. For example, in federal nations such as the United States, fiscal policy is determined to a large extent by the central government, which is empowered to raise taxes, borrow and spend. It is often proposed that the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

 adopt a form of fiscal union. Most member states of the EU participate in economic and monetary union
Economic and Monetary Union of the European Union
The Economic and Monetary Union is an umbrella term for the group of policies aimed at converging the economies of members of the European Union in three stages so as to allow them to adopt a single currency, the euro. As such, it is largely synonymous with the eurozone.All member states of the...

 (EMU), based on the euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...

 currency, but most decisions about taxes and spending remain at the national level.

Control over fiscal policy is a traditionally considered central to national sovereignty, and today there is no substantial fiscal union between independent nations. However the EU has certain limited fiscal powers. It has a role in deciding the level of VAT (consumption taxes) and tariffs on external trade. It also spends a budget of many billions of euro. There is furthermore a Stability and Growth Pact
Stability and Growth Pact
The Stability and Growth Pact is an agreement among the 27 Member states of the European Union that take part in the Eurozone, to facilitate and maintain the stability of the Economic and Monetary Union...

 among members of the Eurozone
The eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...

 (common currency area) intended to co-ordinate the fiscal policies of member states.

Much greater fiscal union, at least in the Eurozone, is seen by some as either the natural next step in European integration
European integration
European integration is the process of industrial, political, legal, economic integration of states wholly or partially in Europe...

 or as a necessary solution to the 2010 European sovereign debt crisis
2010 European sovereign debt crisis
From late 2009, fears of a sovereign debt crisis developed among investors concerning some European states, intensifying in early 2010 and thereafter.....

. Combined with EMU, fiscal union would lead to complete economic integration.

In late 2010 proposals were made to reform some rules of the Stability and Growth Pact to strengthen fiscal policy coordination. In February 2011, France and Germany proposed the 'Competitiveness Pact' that will strengthen economic coordination in the euro area. Spain also endorsed the proposed pact.