Cohesion, growth and more employment in the EU without new national public borrowing … -How does this work?
1. Background
The European Union is actually confronted with increasing internal and external imbalances; concentration of production, income and employment in one municipality, region, country or member state on the one side, budgetary deficits, in-debtness, (youth) unemployment and social unrest in other parts of the Union. Although to third countries the EU in total has still relatively in balance in its current account, with some exceptions (D, NL) many member states of the Union show decreasing competitiveness and growing deficits in its external balances (intra-EU-trade and trade with third countries)
These local, regional and intra- and extra-community imbalances are subject of increasing political concern, which concentrates more and more into a “cry” for more economic growth, but without more new national indebtness…
As the basic elements of economic, social and political cohesion of the Union are at stack, a new co-ordinated approach between fiscal consolidation and non-inflationary growth stimulation is needed.
2. Analysis
a. Where do these “territorial imbalances” within the EU (local, regional, national) come from?
i. From increased competition through the “4 freedoms” within the single market (internal) and “globalisation” of production processes (external) – (Education, professional formation, research, technology, innovation, investment are only some elements to change this basic challenge though adequate national and European policies in the long run)
ii. From increased micro-economic concentration processes coming from higher transparency of prices and wages within the euro-zone, different inflation rates, budgetary, fiscal and social policies in the participating countries of the euro-zone. (micro-economic concentration processes lead in another form into a macro-economic agglomeration processes in specific regions or countries)
iii. From divergent policies at the national level which are non-compatible or sustainable against the market-forces within the single market and the monetary union and leading to local and regional economic and social imbalances.
b. What are the main policy instruments, which could rebalance these “territorial disequilibria” under the assumption of no new national indebtness?
i. Private and public consumption and investments by means of reshuffling the expenditure side of the budget into activity fields with higher employment and income multipliers
ii. Territorial channelling of purchasing power into municipalities and regions with a potential higher investment and employment multiplier
iii. New income sources (Financial Transaction Tax, Energy-, CO2-Tax) and concentrated redistribution in those areas (municipalities, regions) with high unemployment and low tax income.
iv. Common European and specific national/regional projects with a high multiplier effect through the capital market (privately financed and guaranteed by the EU budget)
3. Options/Solutions (through revitalising local and regional purchasing power circuits)
Here are only three possibilities of “how to target cohesion and growth without new national public borrowing? “ focusing especially on the local level (the best multipliers !?)
a. Trying to rebalancing “territorial imbalances” within each Member States of the EU through a two-level mechanism of automatic economic and financial built-in-stabilisers )
i. Between high and low tax-income per capita municipalities within a “Canton”, “Department”, “Province” or Region
ii. Between high and low tax-income per capita Regions (District, Cantons, Provinces) within a country (Member State)
b. Trying to reinforce the financing capacity of the local level (municipalities) through new income sources
i. (Example) Dividing the result of a common “Financial Transaction Tax” (or any other commonly decided new EU financial instrument) between the European and the local level
1. 50% goes for financing common EU projects in the participating countries
2. 50% goes to the local level to reinforce income, investment, long-term employment, infrastructure and the attractivity of the place
a. through attributing again 50% of this total “local share” directly to every municipality on the basis per capita, and
b. the other 50% to those municipalities which are below the average tax income per capita of the Canton, Province, Department or Region
ii. Making the discussion about own resources of the EU more attractive to agree by Member States 2% percentage points of the present VAT rates in each member country become a “European Solidarity and local cohesion tax” where again
1. 50% is going into the EU budget for common expenditures and projects, and,
2. 50% into a “local cohesion fund” which simply monitors that
a. 50% of the yearly amount goes directly – without conditions – to each EU municipality linked to per capita base, and,
b. 50% into those municipalities, which are below the average, tax income per capita of the Canton, Province, Department or Region (according to the choice of the Member State about its two stage per-equation levels for the automatic economic and financial built-in-stabilizers.
c. Trying, especially in the present case of Greece, to launch a public European contest for town-twining between already two twinned towns and one municipality in Greece in order to assist and help practically and show practiced solidarity within the EU by means of examining
i. in which practical forms the Greek municipality could be helped,
ii. what kind of “best practices” in administration could be exchanged, and,
iii. where education, formation programs (Teacher, experts …) are needed?
(Special project” Solidarity with Greek municipalities…”)
4. Practical steps
The up-coming European Council can come in its compromise about fiscal consolidation, cohesion and growth with such like elements, and, ask the Commission to elaborate the details (per-equation mechanisms, margins in each MS, legal aspects) for the next months.
by Michael Cwik
31.5.2012/MC – e-mail: cwikbe@me.com
June 3, 2012
Posted in: News UEF
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