Brexit Institute News

A Fiscal Capacity for the Eurozone: Constitutional Perspectives – Executive Summary

By Federico Fabbrini (Dublin City University)

The European Parliament’s Committee for Constitutional Affairs (AFCO) recently asked Prof. Federico Fabbrini, Director of the DCU Brexit Institute, to write an in-depth report on the Economic and Monetary Union (EMU). The report “A Fiscal Capacity for the Eurozone: Constitutional Perspectives” is available here.

This is a summary of the report’s key findings.


This in-depth analysis, commissioned by the European Parliament at the request of the Committee of Constitutional Affairs, considers the legal basis and instruments available to the European Union for pursing federal integration of the EU’s Economic and Monetary Union (EMU).


The Treaties of the European Union (EU) commit member states to the establishment of an Economic and Monetary Union (EMU) however this project remains incomplete. The Treaty of Maastricht created an asymmetric EMU which federalizes monetary policy but leaves economic policy decentralized. Reponses to the Euro Crisis have not fundamentally challenge and the status quo.


Consequently, this comprehensive report analyses the introduction of a fiscal capacity in the Eurozone from a constitutional perspective.


The Treaties commit the European Union (EU) to establish an Economic and Monetary Union (EMU), but this project remains incomplete. The Treaty of Maastricht created an asymmetric EMU – fully federalizing monetary policy whilst leaving economic policy decentralized – and the legal and institutional responses to the euro-crisis have not fundamentally changed this status quo. For this reason, a growing number of calls has been made at the highest institutional level in favour of endowing the EMU with a fiscal capacity, that is a Eurozone budget that can be deployed as a stabilization tool in case of asymmetrical economic shocks.

The purpose of this in-depth analysis is to examine the introduction of a fiscal capacity in the Eurozone from a constitutional perspective. Comparative analysis reveals that federal unions formed by the aggregation of pre-existing states, such as the United States of America (US) and Switzerland, have developed a fiscal capacity at the central level to support their currency unions.

The in-depth analysis claims that the EU currently has the legal authority to set-up a Eurozone fiscal capacity without a need for treaty change, as already proposed by several EU institutions and member states. Nevertheless, the in-depth analysis explains that it is crucial that a Eurozone fiscal capacity be funded through genuine supranational own resources, rather than inter-state transfers, and this raises challenges given the unanimity requirement in EU tax policy. Moreover, a Eurozone fiscal capacity would have to be based on effective and legitimate governance and accountability mechanisms – through a Treasury authority subject to proper democratic control by the European Parliament. Despite these challenges, the in-depth analysis suggests that the EU has a window of opportunity to introduce a Eurozone fiscal capacity as a result of Brexit, since the United Kingdom withdrawal from the EU compels reforms of the EU revenue and expenditures system.

Ultimately, a fiscal capacity is crucial to complete EMU, and as the example of federal unions like the US and Switzerland highlights, this can be achieved through legal and institutional reforms driven by political leaders at times of economic necessity.

Federico Fabbrini is Full Professor of European law at the School of Law & Government of DCU and the Principal of the Brexit Institute. He holds a PhD in Law from the European University Institute and previously had academic positions in the Netherlands and Denmark. He regularly engages with EU institutions and national governments, and has presented his work to among others, the European Parliament, the European Central Bank, the European Commission, the European Court of Justice and the UK Financial Conduct Authority.

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