This article theorises the territorial solidarity and fiscal federalism and compares Switzerland with the European Union. While inter-territorial solidarity is a prerequisite for legitimate fiscal equalisation, such equalisation in turn also contributes to the legitimacy of and solidarity within federal political systems. By cutting across territorial and ethno-national communities, fiscal transfers often contribute to both a “civic” sense of belonging and a “cosmopolitan” identity. After placing types and degrees of (inter-)territorial solidarity at the heart of our conceptual perspective, we discuss the effects of such solidarity through an analysis of two different forms of “federal” equalisation. Comparing the recently reformed Swiss fiscal equalisation system with the EU structural funds allows us to infer if, and how, the fiscal dimension of federalism matters for feelings of solidarity, reciprocity, unity and, ultimately, for the legitimacy of the very (nation-state or Union) structures that are to contribute to the ever-growing prosperity and happiness of their people(s). In Switzerland, a civic understanding of nationhood and cross-cutting cleavages were necessary conditions for extensive, effective and legitimate fiscal equalisation. We infer that, for the EU, this means that strengthening the equalisation component of the structural funds would contribute to an ever closer Union in a political sense: because fiscal equalisation and inter-territorial solidarity are interdependent, reinforcing the one also means cementing the other. Future studies of the EU and federal-type arrangements are advised to pay more explicit attention to the solidarity-element of territoriality – or the territoriality of (fiscal) solidarity.

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