In Europe, solitary positions do not work
August 30, 2016
During the constitutional referendum campaign, Europe was struck at how the Italian government raised the level of conflict with the EU. Many observers have thought that it was seeking that consensus that, for some years now, always seems to reward those who assume such positions. Still, now Italy is expected to clarify its real intentions and political goals as soon as possible. Having to wait is not out of the ordinary, because partners in the EU always wish to understand what others really intend to do.
Criticizing and contending is permissible, as well as sometimes necessary is lawful, sometimes necessary, and European workings allow for these in various ways, some effective, some not so much. Most important is that whoever has the responsibility of governing is aware of the opportunities and the risks involved. The British case has shown that by sowing the Eurosceptic wind among fellow citizens you end up reaping the Brexist Storm: an experience that can be either a source of warning or inspiration, depending on the goal that one is aiming for.
Now, among the various questions we are concerned about, the most urgent ones are related to the structured discussions on how to comply with the EU parameters relating to the country’s state finances, to the “Stability Law” that the Parliament has just approved, pending the government resignation.
In practice, this law increases the annual deficit: especially to allocate public resources to stimulate the economy and to support exceptional spending (for earthquakes and migrants). The UE recognizes the latter, but is afraid that our general framework won’t hold, because of the stunted economic growth and high public debt; It is noteworthy to point out that reforms and investments, which have been launched in the last two years, have had little impact and that public spending needs to be re-balanced because it is exposed to the unstable situation of some credit institutions and to the increased interests on debt, which for the time being have been contained by the European Central Bank.
In addition to rejecting these objections, the government also made it clear that did not want the EU’s Fiscal Compact rules to be included in the Treaties. Then, it decided to take on a lone position against the EU budget, abstaining in the majority vote on the “annual” resolution and not approving some minimal adjustments to the “multiannual” one, which gets voted unanimously; It should be noted that this reserve could result in a – disproportionate – veto (but the government, in spite of having resigned, should report to Parliament first) during the European Council of next week. Such a policy, with such a diverse scope, carried out with strong tones, is considered by many as instrumental in order to avoid committing to correct the “stability law” in the future. This latter outcome, however, is likely to prove to be an ephemeral deferral of the issue while, in the meantime, Italy ends up isolated on other such issues that do not bring us real advantages or drawbacks, whatever their conclusion turns out to be.
The following, more ambitious alternative might be considered: here it’s summarised in a nutshell. There are two fundamental cornerstones: including the Fiscal Compact in the Treaty on the Functioning of the European Union and reviewing the EU budget and its revenue system (“own resources”). We should urgently ask for works to begin on the first point and, on that occasion, suggest a new, explicit exemption: investments aimed at producing economic growth should not be counted towards the objective of balancing the national budgets. The examination of the abovementioned investments would be made by the EU. In order to simplify it, it can be stated that these have to be partly financed under EU’s budget funds, which, having been set up by the Union itself, can only be considered as “productive”.
Each stage (programming, public tenders, spending, results) must be controlled by the common institutions, as a mutual guarantee among countries. In addition, with the aim of stimulating even more growth rates, European funding needs to be increased: this can be done in the context of a more comprehensive EU budget review, which Italy should ask. Implementing comes in two different ways, both at no additional cost to taxpayers: establishing that member states pay up to the relevant Union funds what they have allocated up until now to subsidies and advantages to national companies; Strengthening the resources of the EU budget by enabling capital collection on the markets, through limited European public bonds (to get an idea, a minimum debt of 6% of EU gross domestic product would provide a sum of money to the EU roughly similar to what the US Federal Budget has invested to revive the US economy).
Undoubtedly, the second method requires a difficult political decision, although quite different from the challenging assumption of issuing eurobonds to guarantee (“to mutualise”) the different national public debts. The first method, however, is already fully consistent with the European rules already in effect, prohibiting member states from competing with each other by helping those companies operating in their respective territories. Such a package of proposals would trigger a real and potentially constructive debate in the EU, which could lead to significant systemic changes that would be of great interest and benefit.