A European paradox remains unresolved: the eurozone has a common monetary policy, but its fiscal architecture remains largely national. Although member states share a currency and a central bank, national governments retain primary responsibility for taxation and public expenditure, subject to common European fiscal rules and coordination. This institutional asymmetry matters beyond economic efficiency.
When crises affect member states differently, their governments have unequal capacities to protect their citizens, while the EU lacks a permanent fiscal capacity comparable to its monetary institutions. Fiscal integration is therefore not merely a technocratic exercise, but a potential prerequisite for a more resilient and democratically accountable European Union.
Monetary and fiscal policies are distinct but interdependent instruments of macroeconomic management. The ECB conducts monetary policy to maintain price stability, while national governments use taxation, public expenditure and borrowing to provide public services and support economic activity.
Their interaction became particularly important during the pandemic, when coordinated monetary and fiscal measures helped cushion the economic shock and support recovery (European Central Bank, n.d.).
Grounded in Articles 3, 119-144, 136, 219, and 282-284 of the Treaty on the Functioning of the European Union (TFEU), the EU’s economic architecture has continually evolved to build a robust framework for coordination and surveillance (European Parliament, 2017).
Prompted by the sovereign debt crisis and subsequent spill over effects from unsustainable public finances, sweeping legal reforms; culminating in the framework revisions of 2011-2013 and 2024; have sought to reinforce sound fiscal governance, simplify regulatory compliance, and reconcile budgetary sustainability with strategic investments in the green and digital transitions (European Parliament, 2024).
Over the past two decades, the structural weaknesses of eurozone economic governance have exposed tensions between economic integration and democratic accountability.
Following the optimistic expansion of market economies in the late twentieth century, the 2008 global financial crisis and the subsequent eurozone sovereign debt emergency severely undermined the alignment between market capitalism and democratic stability (Matthijs, 2017).
This macroeconomic destabilisation catalysed an asymmetric core-periphery divergence: while Northern European economies recovered with relative speed, Southern member states shouldered the main burden through severe economic contraction, elevated unemployment, and externally imposed fiscal consolidation by the “Troika” institutions (Matthijs, 2017).
Crucially, this economic hardship intensified tensions between national democratic accountability and European economic governance (Matthijs, 2017).
Although subsequent extraordinary interventions; most notably during the post-pandemic recovery; demonstrated institutional resilience, underlying structural imbalances persist.
Despite modest macroeconomic stabilization, household confidence remains depressed, and the operational execution of the EU’s reformed economic governance framework continues to face major political and structural headwinds (European Commission, 2024; OECD, 2025).
As persistent inflationary pressures and acute housing affordability issues have sparked social unrest and mass protests across several member states, economic…
