A MISSED OPPORTUNITY
FOR BETTER GOVERNANCE?
Tired debates on the next MFF
Iain Begg
European Institute, London School of Economics
THE GOVERNANCE DEMANDS
Complement to Member State spending
Above all for public investment, but can we explain
the elusive notion of European added value
Offering solidarity
Only to Member States facing difficulties… or also
at the level of the citizen?
– Permanent or just temporary support
A fiscal capacity for the euro area
– Primary orientation is stabilisation
Implies top-down ‘automatic stabilisation’
But could extend to discretionary interventions
THE MANY CONSTRAINTS
Net balances as principal political contest
– Ensuring ‘our/my money back’
– ‘We’re poor: you need to help us’
Wider context of budgetary consolidation
– False proposition or unavoidable politics?
Multi-faceted negotiating ‘boxes’
Each involving Scharpf’s ‘decision-traps’, red lines
Role in smoothing deals: issue linkage/’bribes’
The challenges of conditionality
BREAKING THE SHACKLES?
Economic case for ‘quasi- federal’ approach
– Combination of stabilisation and solidarity
Triggering net flows to ‘shocked’ economies
Yet constitutional imagination needed
Options could include
– Despite treaty, EU level borrowing capacity
– New mechanisms for cross-border flows
Timing of spending under MFF – with stabilisation test
Facilitating cheaper borrowing by constrained MSs
Buffer funds to offset asymmetric macroeconomic trends
A European tax – especially corporate income tax
How to reconcile the many tensions
CONCLUDING COMMENTS
If fiscal or political union is desired…
– Budgetary status quo will not suffice
– But difficult choices arise on mechanisms
Possible implications for new institutions
Evident obstacles
– Risks of cleavages among 27
– Liability and moral hazard concerns
Legitimation: who speaks for tax-payers?
EP? National Parliaments? ...
But a European tax-payer will be needed
“The difficulty lies not so much
in developing new ideas as in
escaping from old ones”
JM KEYNES