In which tax once again raises its head…2018/12/06
#Point of view
Keeping track of the meandering path of reforms in European countries this year can be tough. That’s how some bloggers are analysing the lack of clarity surrounding the decisions taken by several eurozone governments. No one denies the need to shake things up, but the majority of commentators criticise the lack of explanations provided by the authorities in big western democracies.
Yet, time is running short because the economic outlook is shrouded in great uncertainty. We won’t talk this week about the absence of visibility on the Brexit talks, given that the documents passed back and forth between UK Prime Minister Teresa May and the European Commission are more and more obscure. Admittedly, ignorance is no defence in the eyes of the law, whether in letter or in spirit. But very few of Europe’s citizens are capable of understanding what will supposedly govern their daily lives in the months ahead. While some of these reforms are vitally important, anything that is unintelligible or inadequately explained is exhausting people’s patience, upsetting public opinion, and stirring up simplistic reactions that will heighten the impact of populism on the democratic voting process.
Take, for example, Laurent Joffrin’s editorial in the daily Libération on the situation in Italy. Under the headline “The Buffoons in Rome”, Joffrin seeks to compare and contrast the words and actions of the Italian government: “Sleepwalking or sovereignty? For weeks, Italy’s leaders have constantly insulted the European Union, which has panned them for not abiding by their budgetary commitments. ‘Just wait and see! The Commission can take a running jump because Italy will do whatever it wants with its budget.’ But in an antic turnaround worthy of a commedia dell’arte show, the Italian government has just changed its tone: ‘Yes, we will negotiate. Yes, we will show financial restraint. Yes, we can postpone some of the appropriations.’ And so on, and so forth. So is this yet another manifestation of the Commission’s tyranny, forcing people to bow beneath its yoke? Actually, no. True, Brussels did fulminate and brandish the threat of sanctions. But not only were those sanctions mild; they would also have taken a very long time to mature and implement. The Italian government, which had been floundering in the dark, has suddenly run up against harsh reality. The country is heavily indebted and has to regularly seek refinancing from its creditors. Its latest round of sovereign bond issuance – the standard way of plugging gaps in the public finances – was a flop. The interest rates offered to Italy were higher than before but, more importantly, Italian savers (rather than New York traders) have grown reluctant to finance their own government. Hellfire and damnation!”.
The situation is reminiscent of what happened in Greece when Alexis Tsipras found himself in the same quandary at the height of the country’s debt crisis. Sending Brussels packing would have brought him into direct conflict with international creditors, who were even less obliging that the EU. That’s the critical weakness of spendthrift policies: when a country borrows it puts itself in the hands of creditors, who will want their money back.
Joffrin’s editorial continues: “The sleepwalker awakens to find himself teetering on the roof-edge. That’s how nationalists behave when they come to power: they get elected by vilifying Europe but, once in power, they can’t get by without Europe. And that is why Brexit, which has ensnared the UK for the past two years, has not encouraged any of the other European leaders, however populist, to follow suit. For they are well-aware that, to paraphrase Winston Churchill, the EU is the worst of all solutions, except for all the alternatives”.
In France, the weekly newsmagazine Le Point has raised a slew of questions touching on President Emmanuel Macron’s reforms and methods: “Is Macron the French Margaret Thatcher, or is he on course to emulate [his predecessor] François Holland?” The magazine says that many of the reforms have been set in train but stresses that others are needed , despite the current mood of discontent. What should be done? What can Macron say in order to map out a clear way forward without sparking anxiety?
That the reforms are unfit for purpose is a matter of fact, since Europe’s citizens are demanding clear explanations and a collective plan. Another Le Point journalist, Luc de Barochez, writes that “the Franco-German alliance is too timid when it comes to providing answers and explanations about the future of Europe”. Faced with inflation, patchy growth and economic warfare, Europe seems to be demanding greater protection and more clarification. That’s because people want to understand the present in order to get a better idea about their future. In sum, the spirit behind the reforms is itself in needed of urgent reform!