European debates on reform of euro-area fiscal governance frequently refer to fiscal federalism in the United States. In light of the ‘fiscal compact’, agreed by the European Council in 2011, this volume reviews US fiscal federalism from Alexander Hamilton to the present. It is important to note that the US federal government neither mandates balanced budgets nor bails out states in fiscal trouble. States adopted balanced budget rules during the nineteenth century and these rules limit debt accumulation. Before introducing such ‘debt brakes’ for euro-area member states, however, Europeans should consider that they are likely to be more effective when ‘owned’ locally rather than mandated centrally, and that maintaining a capacity for countercyclical macroeconomic stabilisation is essential. Finally, because debt brakes threaten to collide with bank rescues, the euro area should unify bank regulation and restructuring. C. RANDALL HENNING is Professor of International Economic Relations at American University and a Visiting Fellow at the Peterson Institute for International Economics in Washington DC. His work examines economic integration in Asia and Europe, multilateral financial institutions, and macroeconomic and exchange rate conflict and cooperation among G20 countries. MARTIN KESSLER is a Research Analyst at the Peterson Institute. He holds a Masters degree from the Paris School of Economics, and previously worked as a research assistant at Bruegel, and an economic analyst at the French embassy in Berlin.