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For a Europe that invests in the Future

Eurotax and Union Bonds

, by Alfonso Iozzo

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Since the creation of the common market until the introduction of the Euro, Europe has been the instrument for the modernization of the economy and society of those Member States without the internal stability to make choices for progress.

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In recent years, governments have left it up to Europe to make the difficult choices which they themselves were powerless to achieve and it has been asked to modernize the welfare state, permitting the Member States to promote economic development. To overcome the crisis which is today shaking Europe, these responsibilities must be substituted:

­Only Europe can achieve a new phase of development through investment, as envisaged by the Delors plan and the Lisbon challenge in a knowledge society; the States must take on, according to their different needs, the burden of modernization of the welfare state, while respecting the principles of the social market economy and the charter of human rights.

Only if Europe has a unified strategy in investment, research, energy and networks can this challenge be overcome and the use of common resources is therefore the objective to be pursued.

The European budget is an essential instrument and allows the concentration of resources, above all for research; but the budget alone is not enough. Europe must make investments that can and must be financed with loans as happens at State level. It is therefore necessary to strenuously defend the Stability Pact, which prevents the States from excessive public spending, and bring the debt back to sustainable levels so as not to let the burden fall on future generations. A limited EU public debt, financed by the issuing of European Union Bonds, can strengthen the financial discipline of the States and allow the realization of those European investments that can create the conditions for young people to participate in the new phase of the world economy where knowledge and science are the fundamental forces of development.

Eurotax and Union bonds - the way forward?

The recent crisis in the EU budget process ended with a weak compromise which nonetheless rejected the reduction proposed by the United Kingdom, seen by some as an affirmation of euro-scepticism. It is clear, however, that the current methods of financing the EU budget can no longer work and the Austrian Presidency has proposed the inclusion of a Eurotax, instead of national contributions, in the agenda. The introduction of a tax transfers to the EU the responsibility of managing resources for its citizens and allows the EU’s citizens, through the European Parliament, to make their fundamental choices.

There is a link between this introduction and the issue of Union bonds; the conditions to allow a real European tax regime to guarantee their repayment are thus created.

The decision to use a part of the EU’s revenues to support borrowing, rather than increasing current expenditure, is consistent with the role that Europe must assume to make the necessary investments to achieve the knowledge society: the Eurotax will thus be aimed at the future age groups, and not at increasing transfers. As happened with the euro which has been able to give constitutional significance to future generations on whom the cost of current expenditure must not fall, the Union bonds and the Eurotax will make the EU’s financial management evolve into an intergenerational solidarity.

The Commission has supported the Austrian proposal for the introduction of the Eurotax albeit with certain tentativeness. That is not enough. It is up to President Barroso to put forward the initiatives to allow the EU to face the new challenges: if there is no action, the European Parliament must react and propose a vote of no confidence.

It might be objected that it is difficult to formulate proposals acceptable to 25 Member States but the history of European unification in all its difficult stages, from the Euro to Schengen, indicates how things started with a group of countries which was then in time extended to those countries which were not ready to start. The strengthened economic cooperation is envisaged not only in the projected Constitution but also in the Treaty of Nice.

The Commission and the European Parliament must take the initiative and present to the Europeans clear and consistent choices for the EU’s future in the 2009 elections.

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