Finally Rolling Up Armsleeves?

June 7, 2005 Topic: Global Governance Tags: DiplomacyTax

Finally Rolling Up Armsleeves?

The outcome of the French and Dutch referendums should be regarded as a chance to definitely change something about the Union's status.

The outcome of the French and Dutch referendums should be regarded as a chance to definitely change something about the Union's status. It may to some extent be true that most French and Duthc used this vote to express their anger on issues different from the Constitution's ratification itself. It may be even true that the timing of the vote was not the proper one for such a decision, given the economic and political trends the EU is now facing. But apart from these considerations, the EU's ruling politicians should really start getting to grips with real life questions regarding the EU. Unifing views on the EU's governance will be a tough task for sure, since the French and the British, for example, have very different views on how the action should be played out in Europe. Asked why theY would vote "NO" for the referendum, many French voters said that they thought the EU was getting much too "liberal". When faced with the same question, most Dutch people will arguably answer they feel threatened by an excess of bureaucracy and by the restriction of liberties. Therefore, one really wonders if a total political agreement will ever be reached. Moreover, the EU is a flop even when it comes to ensuring higher economic competitiveness.

When joining the EU-15, the new member States provided the Union with a peculiar gift: fiscal competition. Levying lower corporate taxes is a massive incentive to businesses, as the Thatcher and Reagan experiences show, and probably the key to getting the EU's economy on the roll. However, not only did European bureaucrats fail to follow this example, giving up the benefits of tax cuts, but they keep calling for "tax harmonization", meaning that all EU member States should adopt the same level of taxation, since the new EU members are regarded as harmful. The French and German pressure on the UK to set a cap limit on weekly work hours wasn't a very nice spectacle either.

At the same time, Brussels's bureaucrats are steaming along with their favourite issue: the immense and shameful waste of money that goes under the name of THE common agricultural policy. As a special cadeau, those lobbies that rule the roost in Brussels even sacked the Draft Directive on Services, once again ensuring that EU consumers will not benefit from any increase in competition. Not to mention the fact that the EU bats no eyelash on the negotiating power worker unions have. It is far too easy to urge Berlusconi to reform the Italian labour market and the whole pension system (which by the way he did) without offering any critique toward how workers' unions behave. Doesn't all of this clash with all the nice words the Maastricht treaty is full of?

Given the above premises, to ask why Berlusconi didn't get Italy's economy to go on the upswing is unfair at the least. We mustn't forget the framework he had to work with! The government's willingness to cut taxes is hampered by Italy's huge public debt, a hard fact that, according to EU rules, doesn't provide for a lot of leeway to start fiscal revolutions. State subsidies will unlikely be eliminated and they correspond to the same amount of money acquired by means of IRAP, the regional tax that will be abolished very soon, Therefore, a huge wave of securitizations is extremely hard to come by, as Professor Carlo Pelanda argued in the May the 31st issue of Il Foglio. But how will the EU react to these measures? The EU's main sponsors should be very careful when defending their creation, since Eromania is outmoded at the moment in Italy. Red tape is already an Italian specialty; we don't need to have EU bureaucrats telling us what to do whilst pulling the reins. We Italians have the feeling we are on a crash course, and indeed we are, but we also fear that the steering wheel is not in our hands. If there's anyone listening in the EU, this is the time to get a move on.

Francesco Galietti


Updated 6/7/05