Fiscal union is the monetary policy integration of all Euro-zone members that it gives all a single policy on their financial management which may include inflation, interest rates, etc. The necessity of fiscal union can be traced in the eventualities of its absence. When there is no fiscal union among Euro-zone members, they keep operating on a single currency, but find it increasingly and consistently difficult to match their domestic monetary policies with that of the single currency.
The borrowing cost of different EU members does not remain the same when there is not fiscal union, inferring a gradual development of disparities in borrowing costs, and thus their internal domestic issues of disseminating the cost across industries. This creates serious problem for the member states to have power on their domestic policy, ability to control inflation, interest rates, and all subsequent implications. In addition, whenever there is a global recession assuming the one in 2008, the impact on the – members to stick to their capital inflows valuation would be eliminated. The value of inflows will soon be termed as mispriced, leading to further to disintegration of the member states, letting alone reach a full grown economic integration that transcends all states. Thus, the fiscal union is more critical to be had first combined with a political unity that will make the disparities stagnate and establish sustained long term integration practices.