I am currently giving a lot of talks in Europe and the US about the Eurozone crisis, how to understand it and what kind of reforms are needed to set the currency area onto a more sustainable course. Some of these thoughts are summarised in an article recently published on this website.
There is, however, one other idea that I have been mulling over for quite some time and that I think is worth discussing. There is a lot of talk about the need to rebalance the Eurozone but very few thoughts on a sustainable system of fiscal transfers that could further stabilise the currency area. Here is what I have been thinking about that could maybe achieve this:
There is a Euro Group in the Council but none in the European Parliament. I think it is time to change this. A Euro Group in the EP – consisting of all MEPs from Eurozone countries – could run a Eurozone budget (on top of the normal EU budget) and take spending decisions with the overall macroeconomic health and strategic inetrests of the currency zone in mind. The Eurozone budget could be generated by new taxation (especially a new financial transaction tax levied across the Eurozone would be a good start). There should also be a rather short budget cycle – not the long-term framework the overall EU budget works under – which should create more political debate about investment and spending priorities and could thus make parliamentary business more interesting.
Any comments on this?
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I wonder whether it’s enough, but it’s a good start. “Group” is an overused word, though.
In House of Commons terminology (non-Euro, I know…) it would be a “Eurozone Grand Committee” http://en.wikipedia.org/wiki/Scottish_Grand_Committee
Yes, this could only be a start but would go into the right direction. Group only because of the equivalent name in the Council…
Anthony has hit one of the nails on its had about one issue with the European institutions, that is they use in English language, non-direct equivalents like Group instead of Committee or President instead of Speaker or Presiding Officer.
Dangerous idea, Henning. For years we were all concerned about a two-speed EU emerging and now we have it in spades with the Eurozone and the consequential push for further significant integration amongst Eurozone members. That’s less of (but still) a problem for relations with those countries that are lined up to join the Euro, but is a huge headache for managing relations with those countries who have declined to join for now, especially for the UK. The march to the periphery that the UK is engaged in, and which picked up speed following Cameron’s disastrous tactics over the Fiscal/ESM treaties, is something which all on the Euroean Left should observe with dismay. The UK is hugely improtant to a strong and economically integrated Social Europe and anything that enables the crazies to put the UK in an EFTA relationship should be avoided. This is where your suggestion about a Eurogroup EP comes in. Such a move, while superficially attractive for those of us who want to push on towards effective federalsation, would have the effect of disrupting the democratically-representative role possessed by the one directly-elected institution that represents British people in the EU. Rathe rthan offer further encouragement to the crazies to exit stage-right, we should be looking at how we might use the “unity” of the European Parliament to bring countries like the UK and Denmark on board with the Euro and with further economic and social integration.
Dear Desmond, I have to disagree on this. The UK position cannot be an excuse not to go forward with necessary institutional reform in the Eurozone. The country has to sort out where it stands on Europe but this cannot be a brake on others. The EU has never really been one speed and the idea that everybody moves at the same pace is dead, as is the idea of the Europe of elites. There will be one or several other layers around the Eurozone core and the UK and other countries can decide where they feel comfortable. But the EZ has to reform if it is to survive. They proposal by the way also draws on ideas for an English parliament consisting of all English Westminster MPs…
I have several problems with Henning’s proposal.
First the FTT.
There has not been a final decision on a FTT. As far as I know it is not sure whether all the Eurozone-countries are in favor of a FTT. In fact it is not sure whether the Netherlands are in favour; the current (interim) government is not. The PvdA is only a lukewarm proponent. If not all Eurozone-countries participate, you got a governance-problem. In fact this problem is broader: more countries are supposed to enter the Eurozone. Are they supposed to accept the FTT as ‘aquis Eurozone’?
Second it is not clear whether the FTT will be collected at the European level nor national. The Dutch government e.g. (supported by the PvdA) is against European taxes . National collection makes the governance problem mentioned less urgent.
If you have a Eurozone-level collected FTT I wonder if spending decisions should be taken by the European Parliament. Normally the parliament would vote about the spending structure, with the Eurozone-government (or, in its absence, the Eurozone-commissioners or the FTT part of them) will have the task of factual implementation.
Finally I wonder if fiscal transfers should not be as automatic as possible (automatic stabilisers), with no political spending decisions necessary. Personally I would favour a subsidy for a e.g. 6 month training course cum income for each new unemployed person (especially the young unemployed), implemented by an European agency. In that way you improve the quality of the labour force and you stimulate the receiving country to help the unemployed find a job within 6 months, because after that period the national government is responsible for income.
The EU will by connected to this educational scheme, which will enhance its legitimicy a lot.
Dear Chris, the FTT is one obvious example for potential revenue streams, but there could be others. The basic idea is that an EZ budget needs to create new revenue as national governments will be reluctant to give up existing streams. And yes, this means that each country joining the Euro would have to adopt its tax laws accordingly, but new countries would also benefit from being in this system. The Euro Group would again only set the framework and who eventually delivers can be discussed (Commission, national governments, local government, a mixture, …) But there how tight the framework is and what it means to take spending decisions in the aggregate macroeconomic interests of the EZ would have to be discussed.
As a counterbalance against the rather difficult to control power of the council (the euogroup too) this seems a good idea. Resistance of Britain always will exist but it is their own decision to stay in splendid isolation.