Calls For Eurozone Fiscal Union

The Finance Minister of Germany, Olaf Scholz, has added momentum to the idea of greater fiscal union between eurozone countries. The goal of full fiscal union has long been mooted by the European Central Bank and European Union leaders, but officials in Berlin have always been sceptical towards these plans. In an opinion article for the Financial Times, he took the unprecedented step of calling for more fiscal integration:

“The need to deepen and complete European banking union is undeniable. After years of discussion, the deadlock has to end. Therefore, I am calling on the EU to act now to strengthen Europe’s [sic] sovereignty in an increasingly competitive world”

The Eurozone currently has 19 member countries who share a common monetary policy, but each retain their own individual fiscal policies. This intervention by Mr Scholz potentially represents a softening of German attitudes towards fiscal cooperation within the eurozone, which has been centred around opposition to a common EU deposit guarantee scheme. Policymakers in Berlin have traditionally objected to more fiscal union due to concerns of a public backlash from German taxpayers, who suspect they would be propping up shaky banks in weaker eurozone economies.

Mr Scholz’s words echoes previous comments in September from the now former head of the ECB, Mario Draghi. In an interview published on the ECB website, he said:

“I talked about fiscal policy as a necessary complement to monetary policy since 2014. Now the need [for fiscal union] is more urgent than before."

These statements are not surprising given one of the next steps of European Union Integration would be a common fiscal policy. The significance of this is it has now come from an official associated with Germany, which is the main economic powerhouse within the EU.

The Euro has been unsettled recently with disagreements within the ECB on interest rates and quantitative easing. The Pound has appreciated slightly since last week to €1.16608, a rise of 0.88%. The Euro price of gold per troy ounce has been fluctuating widely over the last three months, with a high of €1413.30 per ounce and a low of €1320.35 per ounce. It is now at €1325.25 per ounce - it would not be unreasonable to expect this value to be volatile if uncertainty persists within the eurozone.  

Mr Scholz's opinion piece in The Financial Times can be found here (subscription required).

An edited transcript of Mr Draghi's interview can be found on the ECB's website.