Economic Policy Journal
For years there has been a struggle in the Eurozone between those that want to transform it into a transfer union and those that who want a Europe of independent and cooperating countries. The latter including Austria, Finland, the Netherlands and Germany want strict limits for deficits and debt brakes as envisioned in the Fiscal Stability Treaty. Some, such as the European Constitutional Group, even demand a mechanism for an orderly break-up of the Eurozone. The former including Mediterranean member states led by France, do not openly call their objective a fiscal union or the creation of a “European Super State” but prefer to talk about a “deepening of the European project.” The reason for this division is straightforward: The central and northern European countries would be the contributors to a transfer union while the club Med would be on the receiving side.
After the forming of a new government in Germany, the French President Emanuel Macron has increased his pressure for the Club Med vision of Europe. The French President wants a European Minister of Economy and Finance, one budget for the Eurozone, a harmonization of tax rates (i.e. a minimum rate for corporate taxes) , the transformation of the ESM into an EU institution and the completion of the banking union.
The debate conceals the fact that the Eurozone has already marched forward fatefully on its way towards a transfer union. De facto, the Eurozone constitutes already the most gigantic and inter-national transfer union of the world. The fulfillment of Macron´s plans would only consolidate, deepen, and reveal the transfer union intensifying the moral hazard. Let us revise the redistributive and risk sharing mechanisms already in place in the Eurozone.
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For years there has been a struggle in the Eurozone between those that want to transform it into a transfer union and those that who want a Europe of independent and cooperating countries. The latter including Austria, Finland, the Netherlands and Germany want strict limits for deficits and debt brakes as envisioned in the Fiscal Stability Treaty. Some, such as the European Constitutional Group, even demand a mechanism for an orderly break-up of the Eurozone. The former including Mediterranean member states led by France, do not openly call their objective a fiscal union or the creation of a “European Super State” but prefer to talk about a “deepening of the European project.” The reason for this division is straightforward: The central and northern European countries would be the contributors to a transfer union while the club Med would be on the receiving side.
After the forming of a new government in Germany, the French President Emanuel Macron has increased his pressure for the Club Med vision of Europe. The French President wants a European Minister of Economy and Finance, one budget for the Eurozone, a harmonization of tax rates (i.e. a minimum rate for corporate taxes) , the transformation of the ESM into an EU institution and the completion of the banking union.
The debate conceals the fact that the Eurozone has already marched forward fatefully on its way towards a transfer union. De facto, the Eurozone constitutes already the most gigantic and inter-national transfer union of the world. The fulfillment of Macron´s plans would only consolidate, deepen, and reveal the transfer union intensifying the moral hazard. Let us revise the redistributive and risk sharing mechanisms already in place in the Eurozone.
Read more
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