02 November, 2011
What kind of „common policies“ is needed in an Economic and Monetary Union of the European Union? A check list for European decision makers
A policy paper by Michael Cwik.

1. (Analysis)
What the recent crises have shown:    
a. Neither the Member States nor the EU are prepared to react quickly and efficiently to the economic, financial and social challenges coming from the global markets and the openness of each national economy
b. Most of the political leaders are running behind the realities and the evolution of the markets
c. There are neither long-term visions for a functioning EU nor political options discussed to which people, parties or governments can adhere

2. (Objectives)

What is urgently needed?
a. A functioning decision making mechanism at the EU level for guaranteeing sufficient economic and social cohesion within the internal market
b. Rapid and efficient decision making at least for the euro-zone
c. Feasible, reliable and comparative statistical data for co-ordinating policies and/or arriving to common conclusions and decisions
d. A discussion about political long-term targets of the EU
e. A discussion about the necessary political dimensions for efficiently applying the principle of subsidiarity between the different political levels

3. (Method for solutions)
What kind of instruments and of decisions are required in an Economic and Monetary Union?

a. Centralised monetary policies coming out of an independent Central Bank

b. Framework decisions in the economic field at EU level (on the basis of the community method – majority voting)

i. Surveillance of commonly agreed economic and budgetary targets
1. Monitoring deviations from own or commonly agreed targets

  • Yearly public deficit
  • Public indebtness
  • Fiscal policies in the light of fair and loyal competition

2. A control and sanction mechanism for those countries which are not following the rules
ii. Co-ordination of national economic and fiscal policies at EU level
1. Fixing minimum economic and financial data series for analysis
2. Fixing common margins within in some policy fields like

  • Taxes (VAT, corporative taxes, energy ...
  • Social policies

3. Formulating a common framework as to

  • Visa and immigration policies
  • Surveillance of financial institutes (banks, assurance ..
  • Defining own resources for financing

i. common costs, interests and projects
ii. internal cohesion and solidarity between members

  • Cooperation in tax redistribution, as for example,

i. A specific percentage point of VAT for own EU resources
ii. Harmonized tax on enterprises, financial institutes under the view point of fair competition within the internal market
iii. Commonly decided or harmonized tax rate on energy
iv. Commonly decided or harmonized tax rate on a carbon emission tax (Environment)
v. Financial transaction tax (for, among others, empowering public tax income at national and/or European level)

c. Common cohesion and solidarity mechanisms
i. For-seeing financial procedures and mechanisms for guaranteeing greater internal cohesion (avoiding imbalances/financial crises) and external disequilibria, in particular, as to
1. A public debt crisis
2. Insolvency of system-immanent financial institutions
3. Concentration of employment and unemployment in specific regions and countries (for avoiding large internal immigration)
4. External balance of payment disequilibria
ii. Automatic economic and financial built-in-stabilizers for economic and social cohesion within the internal market, and, in particular, within the member countries participating in the euro-zone
1. Analysis of local, regional and national instruments for internal cohesion of member countries, especially for those in the euro-zone
2. Formulating common minimum conditions for cohesion policies and instruments in member states on the basis of macro-economic indicators
3. Fixing common procedures at EU level, if national policies are not delivering the envisaged results, for example in

  • Structural policies
  • Regional policies
  • Social policies
  • Educational and innovation policies

iii. Creation of a cohesion and solidarity funds
1. In the framework of the internal market
2. Only in the framework of the euro-zone
iv. Possible introduction of the notion of a “European solidarity and local cohesion tax “ as a percentage point of the VAT which would co-finance (with 50% of its total amount) the EU budget and reinforce (with the other 50%) the budgets of the local municipalities in the form of a local financial per-equation mechanism

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