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April 11, 2013
Region:
The current crisis has demonstrated that the eurozone is still a very heterogeneous economic area. As the common monetary policy cannot stabilise a country which experiences an asymmetric shock, there is a growing debate about whether the architecture of the eurozone needs to be complemented by fiscal stabilisation instruments. While the synchronisation of business cycles and an effective absorption of regional shocks would be in the interest of all the euro countries, the main question is how this could be put into practice without creating undesirable incentives. After all, a deeper fiscal integration would hardly be manageable without redistribution components. [more]