Jump to content
House Price Crash Forum

United States of Federal Europe, anyone?


Recommended Posts

https://www.reuters.com/article/eu-economy-germany/update-1-eu-moving-towards-fiscal-union-with-pandemic-recovery-plan-german-finmin-idUSL8N2H325X

If the EC take charge of fiscal policy (as it has taken charge of monetary policy with the Euro) then what are the implications for democratic accountability of national governments?

Without the traditional function of a Treasury, what implications should we expect in national government influence over national economies?

Edited by A.steve
Link to post
Share on other sites
  • Replies 87
  • Created
  • Last Reply

Top Posters In This Topic

 

1) What does this have to do with House prices?

2) Who cares? We're out

1.  House prices are significantly affected by economic events.  Economic events are greatly influenced by fiscal policies.

2. Those who own property in the EU are likely to care - as are any who want to sell property to buyers based in the EU.

Fiscal policy (which I consider the most significant function of national governments) has extraordinary influence on house prices.

Link to post
Share on other sites

Is it a good thing or a bad thing if the Treasury and Fiscal Policy are removed from the control of national governments? Or are there good and bad elements of (a) having it under democratic political control and (b) not having it under democratic  political control

I ask this genuinely, I have a vague memory of Gordon Brown changing the rules on how the Bank of England was managed, issues included short termism, politicians meddling for political advantage, vested interest capture, etc. etc.

 

Link to post
Share on other sites
 

https://www.reuters.com/article/eu-economy-germany/update-1-eu-moving-towards-fiscal-union-with-pandemic-recovery-plan-german-finmin-idUSL8N2H325X

If the EC take charge of fiscal policy (as it has taken charge of monetary policy with the Euro) then what are the implications for democratic accountability of national governments?

Without the traditional function of a Treasury, what implications should we expect in national government influence over national economies?

War. He who controls the money supply (Germany) controls the EU. 

Link to post
Share on other sites
 

Is it a good thing or a bad thing if the Treasury and Fiscal Policy are removed from the control of national governments?

That's a great question.

‘Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed it has been said that democracy is the worst form of Government except for all those other forms that have been tried from time to time.…’

-- Winston S Churchill, 11 November 1947

  

 

I ask this genuinely, I have a vague memory of Gordon Brown changing the rules on how the Bank of England was managed, issues included short termism, politicians meddling for political advantage, vested interest capture, etc. etc.

Brown granted "Independence" to the BoE.  I noted, at the time, that it was independence to implement the policy dictated by the Treasury.

Edited by A.steve
Link to post
Share on other sites

It's a difficult one.

I assume the EZ sets global (EZ wide) rates (such as budget balance), and it is up to each country to decide how those rates are shared out within the country.

But a greater question is who sets the global rate and whether there should be no such thing as a global rate and the rate should be decided on a country by country basis. If this is the case, then the debate on setting the individual rates could be significant and divisive.

For me the EZ economies are too different for there to be global rates and therefore the act of setting the individual rates is likely to be a tortuous and politically charged process.

The EZ is (not surprisingly) about unity. In order to facilitate the ideal, certain economic truths are/have been glossed over or forgotten due to the fact that they are divisive, in the hope that this will lead to stronger long term unity.

It remains to be seen whether that will lead to a festering that will ultimately fragment the EZ or the fear of the consequences of leaving will hold countries within it. I think Italy is really the model here.

Link to post
Share on other sites
 

I assume the EZ sets global (EZ wide) rates...

I don't think 'rates' is the right way to think about fiscal control.

A fiscal intervention is about wealth transfers... it's about an organization spending with the citizens of one country at the expense of the citizens of another.

I think it's about expanding the monetary supply - by providing a fresh, supra-national balance sheet onto which debt can be warehoused.  The credit arising from that debt will inevitably increase the influence of the organization that decides how the debt must be serviced (and by whom) as well as who benefits by virtue of how the fresh cash is spent.

Link to post
Share on other sites
 

https://www.reuters.com/article/eu-economy-germany/update-1-eu-moving-towards-fiscal-union-with-pandemic-recovery-plan-german-finmin-idUSL8N2H325X

If the EC take charge of fiscal policy (as it has taken charge of monetary policy with the Euro) then what are the implications for democratic accountability of national governments?

Without the traditional function of a Treasury, what implications should we expect in national government influence over national economies?

You’re misunderstanding something. A fiscal union does not mean the abolition of national treasuries.

Link to post
Share on other sites
 

You’re misunderstanding something. A fiscal union does not mean the abolition of national treasuries.

🙂  I'll bite.

National treasuries, currently, implement the fiscal policies of nation states - the most meaningful mechanism of government control.  After a fiscal union, where the EC commands the big budgets, while the national treasuries might remain (in name) what would, then, be their purpose?

Link to post
Share on other sites
 

🙂  I'll bite.

National treasuries, currently, implement the fiscal policies of nation states - the most meaningful mechanism of government control.  After a fiscal union, where the EC commands the big budgets, while the national treasuries might remain (in name) what would, then, be their purpose?

A fiscal union doesn’t mean the big budgets would be controlled by the EC. They are talking about 2%.

Link to post
Share on other sites
 

A fiscal union doesn’t mean the big budgets would be controlled by the EC. They are talking about 2%.

Are you telling me that the "2%" (of what) will not be controlled by the EC, or that it doesn't matter because 700,000,000,000 Euros (at the outset) is a small amount?

Edited by A.steve
Link to post
Share on other sites
 

Are you telling me that the "2%" (of what) will not be controlled by the EC, or that it doesn't matter because 2% (700,000,000,000 Euros, at the outset) is a small amount?

2% of GDP. In aggregate it’s a lot of money, but compared to national treasuries, who would continue to be responsible for tax and spend decisions, it isn’t.

Link to post
Share on other sites
 

2% of GDP. In aggregate it’s a lot of money, but compared to national treasuries, who would continue to be responsible for tax and spend decisions, it isn’t.

Fiscal is defined: "relating to government revenue, especially taxes."

For this reason, I take this 'fiscal union' to ultimately require that, while national treasuries may remain responsible for collecting taxes, they will no-longer have control of either the levek of taxes they levy - or how the monies are spent.

[I am not saying this is necesarily a 'bad' thing - only that it seems very significant.]

Edited by A.steve
Link to post
Share on other sites
 

Fiscal is defined: "relating to government revenue, especially taxes."

For this reason, I take this 'fiscal union' to ultimately require that, while national treasuries may remain responsible for collecting taxes, they will no-longer have control of either the taxes they levy - or how the monies are spent.

 

Then your definition of fiscal union doesn’t match what is being proposed.

Link to post
Share on other sites
 

Then your definition of fiscal union doesn’t match what is being proposed.

Then how do the EU intend to service their 700bn Euro debt?

(I don't think that relying on negative interest rates to turn debt into a revenue stream to pay for itself will work.)

Link to post
Share on other sites
 

Then how do the EU intend to service their 700bn Euro debt?

(I don't think that relying on negative interest rates to turn debt into a revenue stream to pay for itself will work.)

The European Commission has own resources (revenue streams guaranteed by treaty) as well as the MFF negotiated between member states, and the amount they can borrow on the markets is set by member state finance ministries, so they will still have the whip hand.

Structuring it like this avoids the problem of one state borrowing with the credit rating of another.

Link to post
Share on other sites
 

Structuring it like this avoids the problem of one state borrowing with the credit rating of another.

Borrowing money against no clearly defined collateral... where the entities responsible for service (and repayment?) remains opaque. What could possibly go wrong?

Link to post
Share on other sites
 

Borrowing money against no clearly defined collateral... where the entities responsible for service (and repayment?) remains opaque. What could possibly go wrong?

Nevertheless it’s a mechanism designed by member states for their benefit. It seems like a superior approach to direct fiscal transfers from one state to another.

Link to post
Share on other sites
 

Nevertheless it’s a mechanism designed by member states for their benefit. It seems like a superior approach to direct fiscal transfers from one state to another.

Before considering if it is a 'superior approach' there would first need clarity what would make an approach 'superior'.  This is a deeply political question.  I do not believe there is univeral agreement about what would be 'superior'.

Link to post
Share on other sites
 

Before considering if it is a 'superior approach' there would first need clarity what would make an approach 'superior'.  This is a deeply political question.  I do not believe there is univeral agreement about what would be 'superior'.

The question is where it’s leading in the medium term. Hypothetically you might imagine the implementation of something like an EU wide rate of 1% VAT going to the central budget. That would be very signifiant, but it’s a far cry from the vision you outlined of a European Chancellor taking over all tax and spend decisions.

Edited by thecrashingisles
Link to post
Share on other sites
 

The question is where it’s leading in the medium term.

Quite.  Fundamental changes in authority to borrow on behalf of other people are likely to have substantial consequences in the medium term.

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.

  • 433 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.