Europe's Fiscal Gap.

This article explores the fiscal gap in Europe and the need for a fiscal capacity in the European Union (EU). Unlike other economic unions, the EU lacks an official treasury, resulting in a lack of stabilizing macroeconomic policies and a reliance on member state contributions. The article discusses the free rider problem, where countries prefer others to take on deficit spending and debt. It also examines the historical development of fiscal capacity in the United States as an example of the complexities of fiscal federalism. The text highlights the challenges of fiscal integration in the EU, the response to the Covid-19 pandemic, and the importance of political union in achieving fiscal federalism. It suggests that Europe is on a similar path to the United States but still has a long way to go. [Extracted from the article]