This paper provides an analysis of the controversial issue of fiscal coordination in the future European Monetary Union, from both a theoretical and policy point of view. It is argued that fiscal coordination is efficient, in particular if governments care about deficits. Authentic coordination would be carried on by a federal government managing a centralized budget. Alternatively, a coordination-like outcome may be achieved by establishing correct deficit targets to sovereign governments. The pragmatic solution when the economic structure of the European Union is not well known consists in assessing upper and lower bounds for deficits. The model emphasizes the positive role of the Stability and Growth Pact.
FOURÇANS, A. and VRANCEANU, R. (1998). Fiscal Coordination in the EMU: A Theoretical and Policy Perspective. In: The Global Economy at the Turn of the Century. pp. 363-380.