Certainly, as Richard and Peggy Musgrave wrote, “economic analysis does not tell us what degree of closeness the member units of a federation should feel toward each other”. Political aspects transcend economic ones. But economic analysis can help us better understand the consequences of various institutional arrangements and choose the instruments we should use to pursue our common objectives.
In the rest of my remarks I will zoom in on some of these aspects of federalism. Economic aspects of federalism An important theme – one aspect of which will be addressed in the first session today – is risksharing. The crisis has reminded us that both private and public risk-sharing are underdeveloped in Europe, and that this underdevelopment comes at huge cost.