Scotland, Veneto, Lombardy, Catalonia… these are all EU regions
demanding greater self-government, in some cases including independence
from their home states but never from the EU. An apparent paradox given
that their demands have increased along with the EU’s own growth in
power. But there is no contradiction.
The EU has super-imposed a new order that sits uneasily with the previous settlements between regions and nation states, both in political and economic terms. An incompatibility requiring an adjustment at EU level rather than at states’ level if we still want “an ever closer union”. Both in Italy and Spain, North to South fiscal transfers were designed as a stabilising mechanism to recycle trade imbalances. It meant the North’s trade surplus financing the South’s trade deficit fiscally: a closed mechanism that made sense while trade and fiscal flows were symmetrical, as was the case before the EU single market and the euro; but hard to justify once the flows are asymmetrical. As a case in point: before the euro, Catalonia used to have a trade deficit with the rest of the world and a huge trade surplus with the rest of Spain; nowadays, it enjoys a 6% GDP trade surplus with the rest of the world while that with the rest of Spain has been halved. But fiscal transfers to the rest of Spain remain untouched, at 8% of GDP.
Both in Italy and Spain, North to South fiscal transfers were designed as a stabilising mechanism to recycle trade imbalances. It meant the North’s trade surplus financing the South’s trade deficit fiscally: a closed mechanism that made sense while trade and fiscal flows were symmetrical, as was the case before the EU single market and the euro; but hard to justify once the flows are asymmetrical. As a case in point: before the euro, Catalonia used to have a trade deficit with the rest of the world and a huge trade surplus with the rest of Spain; nowadays, it enjoys a 6% GDP trade surplus with the rest of the world while that with the rest of Spain has been halved. But fiscal transfers to the rest of Spain remain untouched, at 8% of GDP.
As the Catalonia/North Italy demands for lower fiscal transfers have given the impression that they are selfish and opposed to the solidarity required in any society, it’s worth analysing those fiscal transfers both under moral and efficiency principles.
European Commission President Jean-Claude Juncker expressed recently his fears around an unmanageable EU of 98 states. However, with 28 members holding veto rights for main questions, the EU is already unmanageable. The question is not the number of states but the institutional architecture. For policy reasons, the EC is used to working with the 272 existing regions in the EU and only few of those are ready to assume full self-government. Finding a satisfactory solution for those regions that are ready and willing to do so and reforming the EU’s architecture to make it more social, democratic and manageable is a daunting challenge that must be tackled. Anybody willing to take it up?
Read more: 98 European Union Member States?
The EU has super-imposed a new order that sits uneasily with the previous settlements between regions and nation states, both in political and economic terms. An incompatibility requiring an adjustment at EU level rather than at states’ level if we still want “an ever closer union”. Both in Italy and Spain, North to South fiscal transfers were designed as a stabilising mechanism to recycle trade imbalances. It meant the North’s trade surplus financing the South’s trade deficit fiscally: a closed mechanism that made sense while trade and fiscal flows were symmetrical, as was the case before the EU single market and the euro; but hard to justify once the flows are asymmetrical. As a case in point: before the euro, Catalonia used to have a trade deficit with the rest of the world and a huge trade surplus with the rest of Spain; nowadays, it enjoys a 6% GDP trade surplus with the rest of the world while that with the rest of Spain has been halved. But fiscal transfers to the rest of Spain remain untouched, at 8% of GDP.
Both in Italy and Spain, North to South fiscal transfers were designed as a stabilising mechanism to recycle trade imbalances. It meant the North’s trade surplus financing the South’s trade deficit fiscally: a closed mechanism that made sense while trade and fiscal flows were symmetrical, as was the case before the EU single market and the euro; but hard to justify once the flows are asymmetrical. As a case in point: before the euro, Catalonia used to have a trade deficit with the rest of the world and a huge trade surplus with the rest of Spain; nowadays, it enjoys a 6% GDP trade surplus with the rest of the world while that with the rest of Spain has been halved. But fiscal transfers to the rest of Spain remain untouched, at 8% of GDP.
As the Catalonia/North Italy demands for lower fiscal transfers have given the impression that they are selfish and opposed to the solidarity required in any society, it’s worth analysing those fiscal transfers both under moral and efficiency principles.
European Commission President Jean-Claude Juncker expressed recently his fears around an unmanageable EU of 98 states. However, with 28 members holding veto rights for main questions, the EU is already unmanageable. The question is not the number of states but the institutional architecture. For policy reasons, the EC is used to working with the 272 existing regions in the EU and only few of those are ready to assume full self-government. Finding a satisfactory solution for those regions that are ready and willing to do so and reforming the EU’s architecture to make it more social, democratic and manageable is a daunting challenge that must be tackled. Anybody willing to take it up?
Read more: 98 European Union Member States?
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