Should-Read: Fabio Ghironi: On Twitter: to @MESandbu

Should-Read: Fabio Ghironi: On Twitter: to @MESandbu: “Some readings and thoughts on Macron’s plans and macro policy in the euro area… https://twitter.com/FabioGhironi/status/865695595566030848

…@MESandbu on possible costs from quest for euro-level substitutes for natl policy: https://amp.ft.com/content/a94cad66-3569-11e7-bce4-9023f8c0fd2e Here’s what @MESandbu thinks Macron should focus on: https://amp.ft.com/content/203e4e1a-357f-11e7-bce4-9023f8c0fd2e FT View: This could be good time to pursue badly needed reform of the banking system: https://www.ft.com/content/c6c824c8-3637-11e7-99bd-13beb0903fa3.

I agree w much in these articles, but I also think that Macron’s push for more fiscal policy coordination/fiscal union is very important. Policymakers across EU should move away from notion that, if countries followed its rules, SGP would accomplish fiscal coordination. The SGP is not coordination. It is a set of constraints over and above those subject to which optimal coordination should be pursued. I wrote a few thoughts on this last July here: http://faculty.washington.edu/ghiro/GhiroStraightjacketsVsCoordination0716.pdf

Bottom line: the SGP is suboptimal; it is unenforceable, as Germany itself contributed to showing; and it should be ditched. Policymakers should also move away from the notion that fiscal policy harmonization should necessarily be pursued. Asymmetric shocks across EZ countries are bound to make differences in fiscal policies the optimal outcome under desirable coordination! Finally, policymakers (& analysts) should also move away from the notion that fiscal union should always & only mean a transfer union….

My hope is conversation wd help understanding that true fiscal coordination/union involves more than transfer union. In that sense, I think talking about EZ finance minister can help bc it naturally leads to the question of the role of this minister, which I hope wd lead to discussion of coordination beyond transfers. And even if that’s not accomplished, I think clarity wd be valuable…