Unsupported Economics in the Eurozone

From The Sprout, 15th April 2006

We are used to hearing about the hypocrisy of the EU: Glenys Kinnock and the Development committee cantering in on their white horses, promising to eradicate global poverty by next Thursday if we all attend their cheese-dip reception for 'lesbian equality officers in Africa'.

Yet when it comes to a real issue of development we all seem to follow Lady G's despondency: spending 43% of the EU budget on the CAP is just 'one of those things', like being Welsh.

But it's the shallow, token gestures which makes me reach for the puke bucket, which eclipses any prejudice I can harbour against MEPs who use 'poverty' as a stage for self promotion.

The parliament itself has now found one way of combating this imbalance by selling Oxfam 'fair trade' juice in its subsidised cafeteria. If I was a dairy farmer in the developing world, trying to survive when EU and US dairy subsidies keep world prices 34% lower than they should be, I would be grateful that three people a week were buying my products rather than getting to the crux of the issue.

We saw in Hong Kong how little the EU is prepared to give when it comes to its protectionist trade policies, so when will people realise that the EU is all talk and no action, and that if we really want to help development, countries like the UK and Germany need to claim back their own trade policy?

Another astounding report crossed my desk today in the form of the preparatory report on the broad economic policy guidelines for 2006. The summit in Brussels at the end of March had on the top of its agenda the Lisbon strategy to promote growth and jobs.

This is a good issue to be concerned about, when unemployment in the EU averages about 9%, a figure covering a multitude of sins from countries like Poland, with unemployment rates of 17.8% in 2005, and Slovakia at 15.5%. Growth forecasts are no better, with the French economy limping along at 1.4% and the whole of the eurozone weighing in at a retarded 1.9% for 2005.

So what is the conclusion of the European Parliament in trying to solve these issues? Are they going to realise that the Lisbon Agenda is in fact the 'Washington Consensus' in Europe?

Are they ever.

They are pinning their hopes to a ratification of the Constitution so they can fully harmonise the economies of the EU and, in their eyes, eradicate the competition which they see as causing the problems.

But the Parliament almost has a sexual obsession with tax competition, with grey-suited Christian Democrats and socialists alike all too happy to gang-bang the free-market model. They drone on like sullen lovers, pleading for the EU to adopt a 'competence' in tax matters, a uniform definition of tax residence, the harmonised base rate and of course, a new Euro tax to help stop the squabbles over the EU budget.

I wonder how Ireland feels about this: its low rates of corporation tax it has seen a huge increase in the presence of multinational companies and has predicted growth rates of 5% in 2006 and 4.9% in 2007. The Baltic tigers who embraced the flat tax model after their escape from the jaws of Communism have seen their economies soar and major corporations shift their investments away from Western Europe to these young, more streamlined economies. How is that an illustration that tax competition is such a repulsive notion?

My conclusion is that it highlights the utter failure of the European Social Model, of protectionism and of the endless pursuit of the 'level playing field': it illustrates that EU countries governing themselves succeed much more than countries forced together in this European Union that we have today. The subsidised juice is merely a symptom of our own short-coming, a fantasy - not unlike banks and bourses being able to compete in a market laden by the technocrats tinkering.

Lisbon agenda? What a squeeze!