In the past year, there have been many calls for a permanent central fiscal capacity at the EU or euro area level. This column argues that a European central fiscal capacity would improve policy efficiency by focusing on stabilisation in the event of demand shocks and on boosting potential output in the event of supply shocks. The provision of European public goods appears to be the most promising avenue to tackle the present stagflationary threats. The need to calibrate the central interventions in relation to the typology of shocks calls for a reform of the EU institutional set up, including the creation of a European Minister for Economic Affairs.

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