Establishing a budgetary capacity in the Eurozone. Recent proposals and legal challenges

This article deals with the project of additional budgetary capacity for the Eurozone by investigating its meaning, features and feasibility. The different proposals that have been put forward hitherto describe it as a stabilisation tool aimed at fostering structural reforms and absorbing economic shocks to ensure the resilience of the EMU as a whole. This article will focus on three main issues. First, it will analyse why the need for additional budgetary capacity has arisen during the sovereign debt crisis. Second, it will describe how the additional budgetary capacity would realistically shape up in practice, taking into consideration both its possible revenues and objectives. The final part will then consider the main legal challenges that the creation of an additional budgetary capacity will have to deal with: the identification of the legal basis, the impact on the principle of conferral, the repression of moral hazard behaviours and the creation of an efficient mechanism of democratic control.