French and German finance ministers propose major EU reform

[Tamas]

http://www.theguardian.com/commentisfree/2015/jun/03/europe-france-germany-eu-eurozone-future-integrate

Basically to crete the United States of Europe out of Germany and France and maybe other euro-users, and let the rest of the EU more sovereignty.

I: like the idea.

[Valmy]

About time.

[Admiral Yi]

Basically to crete the United States of Europe out of Germany and France and maybe other euro-users, and let the rest of the EU more sovereignty.

I: like the idea.

Not at all what I got from the link.  Article mentioned harmonization of tax rates and minimum wages.  Nothing about fiscal union.

[Tamas]

Basically to crete the United States of Europe out of Germany and France and maybe other euro-users, and let the rest of the EU more sovereignty.

I: like the idea.

Not at all what I got from the link.  Article mentioned harmonization of tax rates and minimum wages.  Nothing about fiscal union.

There would be no stopping there if you already had that kind of harmonisation. And that's why it will probably never happen. How are you supposed to engage in social demagogy if you can't mess with your nation's budget at will?!

[Valmy]

How are you supposed to engage in social demagogy if you can't mess with your nation's budget at will?!

Easy. You blame the Germans.

[Admiral Yi]

There would be no stopping there if you already had that kind of harmonisation.

Why the hell not?  It's pretty big leap for a Frenchman to cede authority to German voters how he is taxed and how it is spent.

[Tamas]

There would be no stopping there if you already had that kind of harmonisation.

Why the hell not?  It's pretty big leap for a Frenchman to cede authority to German voters how he is taxed and how it is spent.

Precisely my point. There would be a proper common euro central bank etc. well before the tax rates become harmonised.

[Admiral Yi]

You lost me.  I thought your point was France and Germany were going to become the US of Europe.

[Zanza]

There would be a proper common euro central bank

I thought we already have a common euro central bank...?

[Zanza]

In order to do so, we have to launch an economic and social union by agreeing on a new, staged process of convergence that would involve not only structural reforms (labour, business environment) and institutional reforms (functioning of economic governance) but also social and tax convergence where necessary (consistent, though not necessarily equal, minimum wages, and a harmonised corporate tax). This would strengthen our individual economies, establish a truly level playing field across the eurozone, and ensure that tax competition and social dumping don't create races to the bottom and uncooperative fiscal devaluations. It would bring our economies closer, improve the economic potential of EMU and allow us to establish clearly which policies should be centralised, harmonised or simply coordinated.

This convergence between member states would allow the creation of a preliminary eurozone budget, a feature of any functioning monetary union. The current, rules-based fiscal framework – while flexible and important, to ensure fiscal discipline – doesn't guarantee that the sum of national fiscal policies will lead to an adequate fiscal stance for the eurozone as a whole, in either good or in bad times. This demands a fiscal capacity over and above national budgets that would improve the ability to provide automatic stabilisation and allow the European level to expand or tighten fiscal policy in line with the economic cycle.

This budget would have its own revenues (for instance a common financial transaction tax, as well as a small portion of a harmonised corporate tax) and would provide for borrowing on that basis.

Very vague and the budget wouldn't be significant enough to constitute a real federal government. So I don't see the United States of Europe in this.

[Admiral Yi]

Ah, didn't read that far.  So what they're talking about is a dedicated revenue source that the two countries can play pretend union with.

[Tamas]

meh

[celedhring]

A harmonized tax rate for all of the union, given how diverse our economies are, seems to me too inflexible.

[Tamas]

A harmonized tax rate for all of the union, given how diverse our economies are, seems to me too inflexible.

Indeed it would require a federal budget as well, probably with stuff like some welfare spending delegated to it. Not going to happen. I wish it did, but its not going to.

[derspiess]

I was initially opposed, but now I somewhat approve.  I figured you guys would want to know that.