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A MISSED OPPORTUNITY FOR BETTER GOVERNANCE? Tired debates on the next MFF

A MISSED OPPORTUNITY FOR BETTER GOVERNANCE? Tired debates on the next MFF. Iain Begg European Institute, London School of Economics. THE GOVERNANCE DEMANDS. Complement to Member State spending Above all for public investment, but can we explain the elusive notion of European added value

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A MISSED OPPORTUNITY FOR BETTER GOVERNANCE? Tired debates on the next MFF

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  1. A MISSED OPPORTUNITY FOR BETTER GOVERNANCE?Tired debates on the next MFF Iain Begg European Institute, London School of Economics

  2. THE GOVERNANCE DEMANDS • Complement to Member State spending • Above all for public investment, but can we explain the elusive notion of European added value • Offering solidarity • Only to Member States facing difficulties… or also at the level of the citizen? • Permanent or just temporary support • A fiscal capacity for the euro area • Primary orientation is stabilisation • Implies top-down ‘automatic stabilisation’ • But could extend to discretionary interventions

  3. THE MANY CONSTRAINTS • Net balances as principal political contest • Ensuring ‘our/my money back’ • ‘We’re poor: you need to help us’ • Wider context of budgetary consolidation • False proposition or unavoidable politics? • Multi-faceted negotiating ‘boxes’ • Each involving Scharpf’s ‘decision-traps’, red lines • Role in smoothing deals: issue linkage/’bribes’ • The challenges of conditionality

  4. BREAKING THE SHACKLES? • Economic case for ‘quasi- federal’ approach • Combination of stabilisation and solidarity • Triggering net flows to ‘shocked’ economies • Yet constitutional imagination needed • Options could include • Despite treaty, EU level borrowing capacity • New mechanisms for cross-border flows • Timing of spending under MFF – with stabilisation test • Facilitating cheaper borrowing by constrained MSs • Buffer funds to offset asymmetric macroeconomic trends • A European tax – especially corporate income tax • How to reconcile the many tensions

  5. CONCLUDING COMMENTS • If fiscal or political union is desired… • Budgetary status quo will not suffice • But difficult choices arise on mechanisms • Possible implications for new institutions • Evident obstacles • Risks of cleavages among 27 • Liability and moral hazard concerns • Legitimation: who speaks for tax-payers? • EP? National Parliaments? ... • But a European tax-payer will be needed

  6. “The difficulty lies not so much in developing new ideas as in escaping from old ones” JM KEYNES

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