Daniel Lacalle

EU at 60. Much to do

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The European Union is 60 years old today, and it faces enormous challenges.

One wakes up every week with news about the European Union that do not help at all to improve its credibility and popular support. Brussels and the EU seem so detached from the reality of economies and citizens that their top leaders do not even blink or wonder if it is a good idea to say things like “taxes cannot be lowered” (Schaeuble), or that “Brussels dismantles the Spanish government’s excuses to resist raising VAT.” Thank you, Euro-bureaucrats.

It is very dangerous that a European Union, which has unquestionable advantages and must become a global power of growth and prosperity, puts obstacles and expels citizens and companies just to perpetuate a bureaucratic monster.

 

Brussels estimates that increasing VAT would “barely” affect low income families and that the increase in inequality – “only” of 2.6% – could be offset by social transfers. That is, raising VAT “barely” affects low incomes but, as it actually does and also increases inequality, they propose to mitigate it with more subsidies via spending. Bravo. Brilliant. .

For Brussels there is never a negative effect on consumption, employment or economic activity of raising taxes. It never questions government spending. And then they wonder why the EU grows less and has more debt and unemployment than its peers.

The reality, already demonstrated, is that increasing taxes has a direct impact on potential consumption, the purchasing power of families and, in addition, reduces the job creation potential.

Brussels should recognize that it has been wrong for years in its growth and employment forecasts, and analyze why. Applying a bureaucratic directed economy model everywhere impacts growth, prosperity and productivity.

The European Commission loves non-finalist taxes. The so-called “green” ones are a real joke. The consumer still pays the massive “green” subsidies, but they also pay for added “green” taxes. EU citizens pay twice. For the subsidies, and for being so mean as to use a car.

In spending and taxes, the pattern is always the same. For Brussels, to harmonize is raise taxes and spending. It does not question the economic suffocation that takes place in France or other countries. It demands the other EU nations to reach an average -always in tax burden and spending- that France increases disproportionately.

The reality is that, often, the recommendations of the European Commission do not seek to reduce imbalances and promote competitiveness, the creation and attraction of capital and employment. What they do is to perpetuate a “dirigiste” model copied from France that only generates stagnation and greater discontent.

Even in the document where the European Union “explains” why it is not a bureaucratic and excess spending entity, it “clarifies” that “states and local governments will continue to control tax increases” (note that it does not say “manage” or “cut” taxes, but only “increases”). Thank you. It also “explains” that it “only” spends 1% of the wealth of the countries, and that these countries – thank you – spend much more.

The European Union has many enemies, and – let’s be clear – some are at home. Those that defend and justify a model of increasing tax burden and higher interventionism as unquestionnable. Those of us who criticize the EU’s obvious mistakes want a European Union that solves them, not one that follows the ostrich policy of blaming others for its problems.

The tax burden in the European Union has reached historical highs – of 40% of GDP – while ease of doing business deteriorates due to bureacracy and massive regulatory burden. At the same time, while companies and families struggle, the bureaucrats in Brussels reject to make any change that allows the economy to breathe.

The best way to combat those who unjustly criticize the European Union is with actions. Lowering, not raising taxes, as citizens, companies and the ECB demand.

Against the voices accusing the EU of interventionist and bureaucratic, the EU must take action to improve efficiency dramatically and improve ease of doing business. Focus on the countries that grow and are world leaders, not equalize imbalances in a model that only creates stagnation.

We have a golden opportunity in the face of external and internal threats . It is not an opportunity to justify that “there is room” to raise taxes, nor an opportunity to confuse “more Europe” with “more bureaucracy”. It is not an opportunity to attack those who grow, have surplus and create jobs . It is a chance to drastically improve in economic freedom, ease of doing business, open market and increasing disposable income for families, letting job creators do their work.

The EU has in its hands all the tools to be better and more competitive. More Europe is not more bureaucracy.

The European Union cannot continue to settle for being a low growth, high debt, huge tax burden area, penalizing its citizens and companies, the same ones who have bailed-out the bureaucratic leviathan from the crisis.

If we do not wake up immediately from the comfortable deification of bureaucracy and fiscal robbery, the European Union, which is a project worth fighting for, will perish in the face of its own inaction. I do not want it to happen. But I assure you that, if it does happen, I will not blame the EU’s  collapse on the outside enemy excuse, when we have had in our hands all the tools to be stronger, better and more competitive.

Citizens and businesses are not ATMs to pay for political excesses, they are the clients of a European Union that must be at the service of the economic agents who contribute and create jobs, not at the service of bureaucracy.

Daniel Lacalle is a PhD in Economics and author of Life In The Financial Markets, The Energy World Is Flat (Wiley) and Escape from the Central Bank Trap (BEP).

Una respuesta a EU at 60. Much to do

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