Fiscal union

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Fiscal union is the integration of the fiscal policy of nations or states. In a fiscal union, decisions about the collection and expenditure of taxes are taken by common institutions, shared by the participating governments. A fiscal union does not imply the centralisation of spending and tax decisions at the supranational level. Centralisation of these decisions would open up not only the possibility of inherent risk sharing through the supranational tax and transfer system but also economic stabilisation through debt management at the supranational level. Proper management would reduce the effects of asymmetric shocks that would be shared both with other countries and with future generations.^[1] Fiscal union also implies that the debt would be financed not by individual countries but by a common bond.^[2]

In the European Union, fiscal union has been mooted as a next step forward into deeper European integration but, as of July 2022^[update], remains largely just a proposal. If fiscal union were to happen, national expenditure and tax rates would be set at European Council level. There would be Eurobonds instead of individual national bonds that would finance collective Euro debt.^[2]