A Stabilisation Fund for the Eurozone

This paper sets out to explore the issues related to the establishment of a supranational fiscal stabilisation fund for the Eurozone . A brief outline of the current economic and fiscal working arrangements of the Eurozone is provided. A summary of likely benefits from creating such a stabilisation fund then follows. Issues of moral hazard and accountability in expenditure from the fund are identified with potential institutional solutions explored. An operable working arrangement for the fund is proposed, having considered these issues. This proposed model is built on economically defensible foundations, while respecting member state diversity and allowing national administrations significant flexibility to utilise the funding in what they consider the most appropriate manner. Oversight and sanctioning procedures are detailed which help to avoid many of the potential pitfalls which might hinder further European economic integration through the mechanism of the stabilisation fund.

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