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Remaining unions to make Europe work


Financial inclusion 16/1/2015 Send to a friend
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The crisis which began in 2007 and particularly punished the European integration since 2010 has received as a feedback the banking and fiscal union draft reports from the EU institutions. The second one warns that the Eurozone and the whole EU-28 will continue to be vulnerable to future international crisis if the European Parliament, the Council and the European Commission do not seriously undertake the fiscal solidarity, which is essential to make the labour and capital mobility succeed.

Seven years after the beginning of the crisis, the Eurozone and the European Union were one of areas in the world with the poorest macroeconomic performance compared to the emerging and developing countries: the employment, investment, consumption levels, including income and savings were lower than those existing in 2007. The feeling that the European integration does not succeed has survived to the incipient and uncertain recovery, threatened by its sustainability before establishing it due to the high debt rate, despite the fact Europe has made enormous sacrifices to reduce it, and has ended up by increasing inequalities and weakening the traditional political organizations as the disgust and the injustice feeling of citizen grows. But the EESC has already done its job, waiting to be heard by other institutions.

At the time of maximum uncertainty in Spain and in the rest of Europe, when distrust in banks polluted sovereign debt and many doubted about the future of the euro or even the European Union itself, we reminded from the EESC that this crisis knocked the euro because when designing it politician disregarded what early integration and optimum currency areas theories alerted: strengthening the lack of labour mobility and ensuring greater capital mobility through fiscal solidarity. As the first condition was minimal and the second almost non-existent, it was not surprising to see how the lack of confidence in the European institutions would end up by fragmenting capital markets.

More than two years ago that the European Central Bank (ECB) finally decided to react, as the Commission, Parliament and the European Council were giving slow signs to solve the problem by strengthening the euro through the forgotten Fiscal and Banking Union. Consequently, the EESC adopted late in 2012 our opinion to create a bigger Banking Union, urging a monitoring mechanism by 2014, as well as up to 100,000 euros as guarantees in deposits and other unique regulatory mechanisms. Now in the last plenary session, the EESC has just adopted with 164 votes in favor, 53 against and 11 abstentions our opinion to complete the Economic and Monetary Union (EMU) through a greater European fiscal integration, especially in the Eurozone.

Once again, we highlight that the fiscal solidarity is especially urgent in order to resolve the deficiencies in the labour mobility. This is particularly striking in Spain, where for example the real employment rate (key indicator, related to tax collection) will be by the end of 2014 around 15% below its peak in 2007, rate already recovered by US last summer and expecting that the EU finally does it by next year or the following. Meanwhile Juncker´s Plan to invest over 300,000 million euros and the rest of his measures for "A New Beginning" comes slowly and bureaucratically, making us think whether this will be possible six months the new Parliament has taken office, with more competence and legitimacy than the previous.

To move towards this solidarity, the EESC proposes in a mid-term (18 months to five years) a supplementary federal budget, at least in the Eurozone, that allows implementing common unemployment insurance, cohesion policies and sustainable investments associated with the green economy and an improvement in the human capital. The budget would be financed with five taxes, including financial transactions, which the EESC recommends to extend it to at least the 18 European countries, because in the current project there are only 11; especially there are missing some dubious countries that have first got to end up with the brutal practice of tax havens, whose users were proposing to levy it to other taxes however this has finally not succeed. But above all, we recommend other effective mechanisms to fight the cancer of fraud and the tax avoidance with greater coordination and control, especially by promoting with tax incentives the replacement of cash by electronic payments, such as cards and new mobile payments which are more traceable, aspect very important in Spain, the country with the biggest 500 euro banknotes circulation.

In the short term (six to eighteen months), the EESC proposes to create a "Common Consolidated Corporate Tax Base" in the EU, responding to global developments at OECD and G20 level on base erosion and profit shifting (BEPS) to ensure that tax systems are transparent and do not grant unfair tax advantages, besides improving administrative cooperation, especially within the EU to advance the harmonization and simplifications of the tax process reducing the labour taxation and increasing capital taxes to complement income by improving social benefits.



(*) Carlos Trias is rapporteur of the EESC opinion "Completing the EMU the role of fiscal policy" as well as president of the Consultative Commission on Industrial Change (CCMI)
(**) Gustavo Matias, an expert, journalist and professor of Economic Structure and Economics Developments at the Autonomous University of Madrid


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