Fiscal Option for the Ebc

Socioeconomics and Fiscal Policy Current Events Article Review One of the more interesting discussions occurring relative to the purpose and effective use of fiscal policy in today's macroeconomic environment is arguably occurring inside the European Union (EU). There is a high level debate that is ongoing about the future of the EU after various economic crises that have emerged such in Greece, most notably, but also in other economies such as Spain.

Some argue that the since the European Union is made up of independent nations with their own elected governments, their problems are going to be essentially local and they will need local solutions that any policies from a centralized financial system that sets fiscal policies for all the EU nations could ever possibly address (Debating Europe, N.d.).

There are many ideological objections to the fiscal union that is being formed that lie outside its potential effectiveness, such as the issue of taxation without representation, however such arguments should be overlooked and the focus should merely the costs of benefits of collective fiscal policy for European nations.

In a recent press release published by the European Central Bank, Benoit Coeure, an executive board member addresses many of the concerns about collective monetary and fiscal policies in the EU and their role in the future of the EU in general in a presentation given to Euro leaders (Coeure, 2016).

He first acknowledges some uncertainty about the role of the Central Bank of Europe (EBC) in the future as a response to many of the EU citizens voicing doubt of this institution and their loyalty to the European Union in general. Also, the EBC fully acknowledges its need to strengthen its legitimacy among the population especially by adopting more democratically accountable oversight from the member nations.

Despite all the criticisms that are appear in regards to the role of the ECB in Europe, it is clear that the European Union has many potential macroeconomic advantages to be gained through collective action that the ECB can administer. One of the primary advantages is that the ECB can craft policies that help maintain a level of price stability that can benefit the union in a multitude of different ways such as fostering trade, foreign investment, and the ability to maintain a long-term growth strategy among others.

However, one the problems that the ECB faces in responding to some of the immediate financial needs that are present in the member states are limited because the ECB has limited room to institute and meaningful fiscal policies. As Coeure explains: "(referring to the need for fiscal policy for sustained growth) .. it's true that there is limited room for manoeuvre in terms of using fiscal policy to support growth, and the fiscal rules cannot be stretched to the point where they would lose all their credibility.

But while some countries have such margins under the Stability and Growth Pact (which they are already partly using to support refugees), all countries can make their tax structures more favourable to growth and redirect public spending towards investment, research and education." (Coeure, 2016) The inability for the EBC to use any form of fiscal policy has definitely been one of the most difficult aspects for the address the needs of individual countries from a macroeconomic perspective.

For example, if the ECB had the authority to institute a fiscal policy during the Greek crisis (or even now), then the EBC could.