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Today’s Top Headlines




German Chancellor Eyes 'More Europe' In Fiscal Union

by Ulrika Lomas, Tax-News.com, Brussels

12 June 2012

German Chancellor Angela Merkel has underlined the need for ‘more Europe’, for not only a monetary union, but also for a so-called ‘fiscal union’, namely a greater common budgetary policy.

Interviewed on ARD television, ahead of planned meetings with Britain’s Prime Minister David Cameron and with Norway’s Prime Minister Stoltenberg, Chancellor Merkel confirmed plans to call for more joint budgetary policy at the upcoming European Union (EU) summit due to take place at the end of June.

Chancellor Merkel underlined the need above all for a political union, which would involve progressively relinquishing national competencies and granting greater control to Europe.

Alluding to the new Stability Pact, or so-called ‘Six Pack’, Chancellor Merkel explained that this pact already marks a step towards “more Europe”, as it enables the European Commission to assess both the economic viability and the competitiveness of individual member states and to draft a follow-up report on each country. Merkel indicated that this pact would over time be further developed to achieve greater common policy to complement the single currency.

Reiterating that budgetary consolidation and growth are two sides of the same coin, and that without solid finances there is no growth, Chancellor Merkel conceded that solid finances alone are not enough. Other factors, notably competitiveness, or the ability to sell products all over the world, play a key role, Merkel said. Referring to the fact that the fiscal compact aiming at greater budgetary discipline among member states was signed back in March by twenty-five of the twenty-seven EU member states, Merkel pointed out that this is an accepted view in Europe.

Acknowledging that there is already and will continue to be a Europe moving at different speeds, the German Chancellor insisted that that any countries in a monetary union will have to “move closer together”. While underlining the need to allow every country the possibility of joining in, Merkel nevertheless warned that advances would not stop simply because one or other country does not want to come along just yet.

Following her meeting with UK Prime Minister David Cameron, the German Chancellor emphasized that both countries are committed to ensuring solid budgets, to securing growth to create jobs and to improve prosperity, and to increasing competitiveness. The UK and Germany are in complete agreement that the Single Market is the basis on which to improve competitiveness, Chancellor Merkel added.

In her joint press statement, Chancellor Merkel admitted that although the fiscal compact is a prerequisite to saving the euro, it is not enough in itself, noting that in acute crises other instruments of solidarity are necessary, notably the recapitalization of banks and the setting up of firewalls. There is also the need for greater consistency, not just as regards fiscal policy but also in other areas, Merkel pointed out.

On the issue of a financial transactions tax, David Cameron made clear his stance that banks and financial institutions should indeed be taxed within reason. Alluding to the UK’s bank levy and to the country’s so-called “Stamp Duty” tax levied on share transactions, Cameron pointed out that the British government is already taxing such institutions, in some cases more than in many other European states.

Cameron reiterated, however, that the UK government does not back the introduction of a financial transactions tax in Europe, arguing that trade would simply relocate to other countries. Such a levy would not create “the right incentives”, Cameron continued, while maintaining that in contrast the introduction of a bank tax or “something similar” would be “completely reasonable”.

TAGS: tax | European Commission | fiscal policy | budget | tobin tax | Norway | Germany | currency | trade | European Union (EU) | Europe

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