I have signed this manifesto and I encourage you to do the same:
The European Union is experiencing an existential crisis, as the
European elections will soon brutally remind us. This mainly involves
the euro zone countries, which are mired in a climate of distrust and a
debt crisis that is very far from over: unemployment persists and
deflation threatens. Nothing could be further from the truth than
imagining that the worst is behind us.
This is why we welcome with great interest the
proposals made at the end of 2013 by our German friends from the
Glienicke group for strengthening the political and fiscal union of the
euro zone countries. Alone, our two countries will soon not weigh much
in the world economy. If we do not unite in time to bring our model of
society into the process of globalization, then the temptation to
retreat into our national borders will eventually prevail and give rise
to tensions that will make the difficulties of union pale in comparison.
In some ways, the European debate is much more advanced in Germany than
in France. As economists, political scientists, journalists, and above
all citizens of France and Europe, we do not accept the sense of
resignation that is paralyzing our country. Through this manifesto, we
would like to contribute to the debate on the democratic future of
Europe and take the proposals of the Glienicke group still further.
It is time to recognize that Europe's existing
institutions are dysfunctional and need to be rebuilt. The central issue
is simple: democracy and the public authorities must be enabled to
regain control of and effectively regulate 21st century globalized
financial capitalism. A single currency with 18 different public debts
on which the markets can freely speculate, and 18 tax and benefit
systems in unbridled rivalry with each other, is not working, and will
never work. The euro zone countries have chosen to share their monetary
sovereignty, and hence to give up the weapon of unilateral devaluation,
without however developing new common economic, fiscal and budgetary
instruments. This no man's land is the worst of all worlds.
The point is not to pool all of our taxes and
government spending. All too often today's Europe has proven to be
stupidly intrusive on secondary issues (such as the VAT rate on
hairdressers and equestrian clubs) and pathetically impotent on
important ones (such as tax havens and financial regulation). We must
reverse the order of priorities, with less Europe on issues on which
member countries do very well on their own, and more Europe when union
Concretely, our first proposal is that the euro zone
countries, starting with France and Germany, share their corporate
income tax (CIT). Alone, each country is hoodwinked by the
multinationals of every country, which play on the loopholes and
differences between national legislations to avoid paying tax anywhere.
National sovereignty has thus become a myth. To fight against this “tax
optimization”, a sovereign European authority needs to be given the
power to establish a common tax base that is as broad as possible and
strictly regulated. Each country might then continue to set its own CIT
rate on this common base, with a minimum rate of around 20%, and with an
additional rate on the order of 10% to be levied at the federal level.
This would make it possible to give the euro zone a real budget, on the
order of 0.5% to 1% of GDP.
As the Glienicke group rightfully points out, this
budget capacity would allow the euro zone to carry out stimulus and
investment programmes, in particular with respect to the environment,
infrastructure and training. But unlike our German friends, we feel it
is essential that the budget of the euro zone comes from a European tax,
not from contributions by the States. In these times of starving
budgets, the euro zone needs to demonstrate its ability to raise taxes
more fairly and more efficiently than the States; otherwise, people will
not grant it the right to spend. Beyond that, it is necessary to very
quickly generalize the automatic exchange of banking information within
the euro zone and establish a concerted policy to make the taxation of
income and wealth more progressive, while at the same time jointly
waging an active fight against tax havens outside the zone. Europe must
help to bring tax justice and political will into the globalization
process: such is the content of our first proposal.
Our second proposal is the most important and flows
from the first. To approve the tax base for the CIT, and more generally
to discuss and adopt the fiscal, financial and political decisions on
what is to be shared in the future in a democratic and sovereign
fashion, we must establish a parliamentary Chamber for the euro zone.
Here too we join our German friends from the Glienicke group, who
however hesitate between two options: either a euro zone Parliament
consisting of the members of the European Parliament from the countries
concerned (a sub-formation of the European Parliament reduced to the
euro zone countries ), or a new Chamber based on grouping a portion of
the members of the national parliaments (e.g. 30 French MPs from the
National Assembly, 40 members from the German Bundestag, 30 Italian
deputies, etc., based on the population of each country, according to a
simple principle: one citizen, one vote). This second solution, which
takes up the idea of a “European Chamber” proposed by Joschka Fischer in
2011, is, we believe, the only option for moving towards political
union. It is impossible to completely deprive the national parliaments
of their power to set taxes. Precisely, it is on the basis of national
parliamentary sovereignty that a shared European parliamentary
sovereignty can be forged.
In this scheme, the European Union would have two
chambers: the existing European Parliament, directly elected by the
citizens of the EU 28, and the European Chamber, representing the States
through their national parliaments. The European Chamber would
initially involve only the countries of the euro zone that want to move
towards a greater political, fiscal and budgetary union. But it would be
designed to welcome all EU countries agreeing to go down this road. A
Minister of Finance of the euro zone, and eventually an actual European
government, would answer to the European Chamber.
This new democratic architecture for Europe would
make it possible to finally overcome today’s inertia and the myth that
the Council of Heads of State could serve as a second chamber
representing the States. This wrong fable reflects the political
impotence of our continent: it is impossible for one person to represent
a country, unless we resign ourselves to the permanent impasse imposed
by unanimity. To finally move to majority rule on the fiscal and
budgetary matters that the euro zone countries choose to share, it is
necessary to create a genuine European Chamber, where each country is
represented not by their head of state alone, but by Members who
represent all political persuasions.
Our third proposal directly concerns the debt crisis.
We are convinced that the only way to put this definitively behind us
is to pool the debts of the euro zone countries. Otherwise speculation
on interest rates will renew again and again. It is also the only way
for the European Central Bank to conduct an effective and responsive
monetary policy, as does the US Federal Reserve (which would also be
hard pressed to do its job properly if every morning it had to arbitrate
between the debts of Texas, Wyoming and California). The pooling of
debt has de facto already begun with the European Stability Mechanism,
the emerging banking union and the ECB's Outright Monetary Transactions
programme, which already affect the taxpayers of the euro zone to one
extent or another. It is necessary now to go further, while clarifying
the democratic legitimacy of these mechanisms.
We must re-start from the proposal for a “European
debt redemption fund” made in late 2011 by the council of economic
experts to the German chancellor, which was designed to pool all debts
exceeding a country’s 60% GDP limit, and add in a political component.
It is not possible to decide twenty years in advance how quickly such a
fund could be reduced to zero. Only a democratic body, namely the
European Chamber formed out of the national parliaments, would be able
to set the level of the common deficit every year, based concretely on
the state of the economy.
The choices made by this body will sometimes be more
conservative than we might personally wish, and at other times more
liberal. But they will be taken democratically, based on majority rule,
in the light of day. Some on the Right would like these budget decisions
to be confined to post-democratic bodies or frozen in constitutional
marble. Others on the Left, prior to accepting any strengthening of
political union, would like a guarantee that Europe will forever carry
out the progressive policies of their dreams. These two pitfalls must be
avoided if we want to overcome the current crisis.
Debate over Europe's political institutions has all
too often been pushed aside as technical or secondary. But refusing to
discuss the organization of democracy ultimately means accepting the
omnipotence of market forces and competition and abandoning all hope
that democracy can regain control of 21st century capitalism.
This new political space is crucial. Beyond macro
policies or fiscal issues, our social models are a common good that we
need to preserve and sustain. But they are also key to a successful
inclusion in globalization. For fiscal systems convergence to the
growing concern on social investment, France and Germany initiatives or
reinforced cooperation are missing the point. 28 European Union lags on
those subject to translate consensus into act and, when it come to
money, finally fails. A European Chamber would be the place where
decisions are made because all implications in terms of rights and
duties would be explicit. The scope for such decisions is large and one
can dream of subjects to be considered : german corporate governance, by
a broader power accorded to employee representatives has contributed to
keep a productive sector in the crisis ; childhood care for all ;
training ; social legislation convergence ; a price for CO2 emissions in
order to mitigate climate change.
Many will oppose our proposals by arguing that it is
impossible to amend the Treaties, and that the French people do not want
greater European integration. These arguments are false and dangerous.
The treaties are being modified constantly, as was the case in 2012,
when the matter was settled in little more than six months.
Unfortunately, this was a poor reform, which reinforced a federalism
that is technocratic and inefficient. To claim that public opinion does
not like today's Europe and then conclude that there should be no change
in its basic functioning and institutions amounts to a culpable
inconsistency. When the German government produces its new proposals for
reforming the treaties in the coming months, nothing says these reforms
will be more satisfactory than those of 2012. But rather than just sit
on our hands waiting, what is needed is finally to start a constructive
debate in France so that we finally have a social and democratic Europe.
Paul Krugman: Zombies of Voodoo Economics
6 hours ago