The pace of “union creep” into the sovereignty of European Union nations ratcheted up with the financial crisis. Some of the changes – a new president and regulation of pension funds, private equity and hedge funds – were coming anyway, But the crisis brought more centralised say in the expenditure of errant members and bloc-wide bank stress tests. But the planned proposals for EU-wide taxes on banks, financial transactions, air travel and carbon permits envisage speeding the creep up to a canter.
The economic logic is almost irrefutable. As the debate over Greece’s debt made clear, a monetary union requires political and fiscal union, or at least unity. The creation of the European Financial Stability Facility and the European Central Bank’s decision to buy members’ sovereign debt are steps in that direction.
A common tax, though, would be a quantum leap forward. Brussels would start to depend financially directly on European taxpayers, rather than on national governments. Also, such taxes would create a permanent mechanism to collect money from, and redistribute it to, the whole region, bypassing strictly national political concerns.
EU funds already cross borders, but Brussels’ €140bn budget represents barely 1 per cent of Europe’s output. Britain’s government alone will spend six times as much this year, almost half the country’s output.
The tax proposal may not get anywhere, but even if it does, the political hurdles to a full fiscal union remain big. Over two-thirds of Germans opposed their country’s participation in the Greek bail-out, which involved nothing worse than loans. Any substantial redistribution of wealth from the more affluent north to the poorer south remain a long way off. A fully sovereign European Union still looks like a pipe-dream. But then again, a common currency was widely considered impossible just a few decades ago.
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