GREATER fiscal union for the eurozone will benefit small countries like Ireland, an economist has said.
At the Oireachtas European Union Affairs committee, University College Cork (UCC) lecturer Seamus Coffey said that under a fiscal union, countries should be able to deal with "macro shocks" without putting public finances under pressure. It has been suggested that moving towards fiscal union would be the answer to the bloc's sovereign debt crisis.
"If there was fiscal union, in relation to unemployment benefits, that they were ring-fenced at a European level, that you could say, look, your public finances are a mess but your social welfare payments, they're going to be maintained and they'll come from a central fund," Mr Coffey said.
"Once you get yourself back on track and your economy is growing again you'll be a net contributor to that fund but for the moment you're a net beneficiary."
European policymakers, largely led by Germany, have moved toward the idea of greater fiscal union as the crisis rumbles on, although concerns exist about the extent to which sovereignty would be lost.
Mr Coffey appeared before the committee along with the left-leaning Think Tank for Action on Social Change (TASC).
Tom McDonnell, Tasc economist, said that unlike the US, Europe doesn't have inter-regional transfers.
"In the US if you have a localised shock such as a hurricane, the federal government can step in and provide emergency funding," Mr McDonnell said.
"What we don't have in Ireland is if a local industry collapses, or there's an earthquake in Greece, or a massive banking crisis which leads to instability, there is no mechanism in place to deal with that."
He said what was needed was a form of limited central funding which runs a surplus and can be drawn from under specific conditions.