Europe Needs a Temporary Fiscal Union

At a recent meeting of European Union leaders, French President Emmanuel Macron said the coronavirus emergency had brought the EU to a moment of truth. He wasn’t exaggerating. Europe as a single entity, as opposed to a partnership of separate nations, was in no way prepared for the crisis. For good or ill, its response could set the union’s path for years to come.

The EU’s main structural weakness has been apparent for years: It is a monetary union without a fiscal union. When individual countries come under economic pressure, they cannot tailor monetary policy to suit their particular needs; at the same time, unlike states within the U.S., they can’t rely on automatic fiscal support from parts of the union that aren’t struggling. The pandemic is putting this point of fundamental weakness under enormous new stress.