Saturday, October 15, 2016

What Europe (really) needs (Part III)

What Europe (the EU) needs is a performing economy. An economy with high growth and low unemployment. Vibrant demand for good and services, good wages and much more. Potent export skills.

The EU is doing well. But not well enough, as we discussed in previous parts. Not well enough for Europeans to be content.

The EU Single Market came about on 1/1/1993 after an immense legislative exercise that set the framework for it. Trade of goods and services has no barriers, no border controls, no customs, no national product standards, etc.

19 of the 28 members share a single currency and economic stability constraints (eg re max allowable budget deficit).

The EU has a common trade policy and in addition to WTO membership (members are WTO members too) it has trade agreements with many countries that offer better terms than WTO rules do.

EU exports but the EU also imports. Goods as well as services. And workers.

Why is EU the not growing at 3, 4 or 5%?

One could argue that there is not "room" for such growth nowadays, either internal or via exports. Export genius Germany is growth at about 2%,  Why is average unemployment  at 8.1% and not at 5% or less?  Why are people forced to accept mini jobs when they want proper ones? Why are social security systems costing so much and benefits are being cut to achieve better public finances?

Are companies in the EU, large, medium, small and mini, satisfied with the current situation? Independents?

To a large extent, they are not.

If you talk to very small firms and independents in the US you will hear that it is not easy doing business in the US "Internal Market" of 50 states either. There, too, states have their laws, their sales tax rates and their own professional qualifications (as nurses who wanted to go work in Katrina stricken states found out, for example).

So what can the EU do to have a better economy and make its people and companies happier?

Lets keep mind that:
a) Income taxation for person and companies is a national competence and problems are dealt via bilateral agreements based on an OECD model.
b) VAT rates are not uniform, there are brackets and each state chooses its exact ones.
c) Companies that do not  just trade but have operations in more than one EU states purchase social security nationally, there is EU wide state insurance agency.

One way for the EU to grow is to adopt a more protectionist trade policy. But member states such as Germany will not agree.

Ireland and others will not agree on an EU wide corporate tax regime.

There is no EU wide policy on migration or an EU INS.

Products and services sold in the EU Marker have to be labelled and provide consumer info in 23 languages.

These are the main areas where systemic improvements can be made in the EU economy.

Yet, all these toy with the national sovereignty of the member states.

Do the Dutch want to have the same social security system as the Spaniards and the Greeks?

Do the Greeks and the Italians want to have the same tax system (and tax rates/brackets) as the Germans or the Swedes?

Economies of scale is one of the arguments.

An EU wide tax agency and an EU social security agency could economise enough costs to pass the savings on to the people.

Have you also noticed that the TV stations you watch, the electricity company, the water supplier and other services and goods you buy do not have common provider in more than one state? Why is that? Do we realise the cost of that? Financial (direct) as well as economic?

To make the European economy better we need European companies, European independents, European workers, European consumers, European taxpayers, European social security clients, European water drinkers, European electricity consumers. We need them. An issue is how to get them with the least further loss of the feeling of sovereignty.

Let us not forget way before the Brexit ref, the French narrowly accepted the Maastricht Treaty, the Danes voted on it twice, the Irish re-voted on Treaties a couple of times and the French and the Dutch rejected the EU Constitutional Treaty in 2005.

In most EU states the number of Eurosceptics is at an all time high. Some may change their mind if the see concrete economic benefits from more Europe some will not.

But the battle needs to be fought on economic and employment/jobs arguments not the ones used now. In that sense, It's the Economy ....!

One way to please Eurosceptics is to offer them concessions in other areas. Eg, the European Commission could be reformed and depend more on detached national civil servants, maybe it should be up to the Council or the EP to initiate legislation. After all, one could argue that Europe needs less legislation and fewer laws, be they EU or national. Because over-legislation and red tape is a key area that holds back growth and job creation. But these topics will be addressed in tomorrow's post (A Leaner Europe).

Feel free to join
my PublicAffairsEurope Facebook group to discuss this issue if you are a Public Affairs professional
my Eurodebates  Facebook group if you are a citizen.

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