Antonio Felice Uricchio and Filippo Luigi Giambrone , The EU budget powering the Recovery plan for Europe, (Fascia A), in Regent´s University London, Centre for banking and Finance, in Open Review of Management, Banking, Finance, pp. 79-105 .(Although this article is the result of a joint reflection of the authors, paragraph 1 and its subparagraphs are edited jointly by Antonio Felice Uricchio and Filippo Luigi Giambrone, paragraph 2 and its subparagraphs are edited by Antonio Felice Uricchio, paragraph 3 and its subparagraphs are edited by Filippo Luigi Giambrone, paragraph 4 is edited jointly by Antonio Felice Uricchio and Filippo Luigi Giambrone.)

The EU budget powering the Recovery plan for Europe: The European Stability Mechanism (ESM) took the decisive step towards granting loans to states that are in danger of losing market access. Since then, public risk sharing in the euro area has risen sharply. Requirements for mobilization are designed to ensure fiscal sustainability. Additional fiscal capacity, in the sense of insurance through purely temporary transfers, does not increase the debt capacity. However, it creates strong political economic disincentives which weaken the regulatory framework of the monetary union and the sustainability of public debt at Member State level. The common monetary policy can only compensate for heterogeneous economic developments in the Member States to a limited extent. Different output gaps and inflation rates would require different monetary policies. With the loss of national monetary policy in the Monetary Union, national fiscal policy therefore has an important stabilizing function. Since discretionary measures can only take effect with delay (Michaelis et al., 2015), automatic stabilizers such as the tax system and unemployment benefits play the main role (Elstner et al., 2016). For them to work, public finances must be sustainable and public debt must be sustainable. There are now various calls for the creation of new fiscal instruments at European level. For example, the plan proposed from the European Commission (Next Generation EU). French President Emmanuel Macron has renewed previous French demands for a budget and a finance minister for the monetary union. Similarly, ECB President Mario Draghi has called for the creation of new fiscal capacity and instruments for a stabilization policy at Union level (Draghi, 2018a). The necessity of a permanent new tax source requires an amendment of the Lisbon- Treaty, where Member States should renounce on part of their tax sovereignty in favor of the European union in order to provide a more effective macroeconomic stabilization function to resist towards asymmetric shocks like for example Covid- 19. The following article attempts to provide an insight into the future of the EU Commission’s plans. Furthermore, aspects of transfer payments within the financial equalization are given to the best of their ability to clarify how shocks are better smoothed out within a federal state. The aim of this article is to clarify the inevitable strengthening of the European fiscal union and to highlight the characteristic of the federal states in the sense that of the central revenue collection of certain taxes.