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Posts Tagged ‘European Commission’

One would think that Europeans might finally be realizing that an ever-growing welfare state and an ever-rising tax burden are a form of economic suicide.

The most obvious bit of evidence is to look at what’s happening in Greece. Simply stated, public policy for too long has punished workers and producers while rewarding looters and moochers. The result is economic collapse, bailouts, and the destruction of cultural capital.

But Greece is just the tip of the iceberg. Many other European nations are heading in the same direction and it shows up in the economic data. Living standards are already considerably lower than they are in the United States. Yet instead of the “convergence” that’s assumed in conventional economic theory, the Europeans are falling further behind instead of catching up.

There are some officials sounding the alarm.

In a column for the Brussels Times, Philippe Legrain, the former economic adviser to the President of the European Commission, has a glum assessment of the European Union.

In 2007, the EU accounted for 31 per cent of the world economy, measured at market prices. This year, it will account for only 22 per cent, according to the International Monetary Fund (IMF). Eight years ago, the EU’s economy was a fifth bigger than the US’s; this year it is set to be smaller than America’s. …Continued economic decline seems inevitable.

But it seems that the folks who recognize that there is a problem are greatly out-numbered by those who want to make the problem worse.

For instance, one would think that any sentient adult would understand that the overall burden of government spending in Europe is a problem, particularly outlays for redistribution programs that undermine incentives for productive behavior.

Yet, as reported by the EU Observer, some statists at the European Commission want to mandate the amounts of redistribution in member nations.

The European Commission is to push for minimum standards on social protection across member states… Employment commissioner Marianne Thyssen Tuesday (9 June) said she wants to see minimum unemployment benefits, a minimum income, access to child care, and access to basic health care in all 28 countries. …The commission will look into whether “enough people are covered in member states when they have an unemployment problem; how long are they protected. What is the level of the unemployment benefit in comparison with the former wage they earned,” said Thyssen. …”The aim is to have an upper convergence…”

This is a horrible idea. It’s basically designed to impose a rule that forces nations to be more like France and Greece.

Instead of competition, innovation, and diversity, Europe would move even further in the direction of one-size-fits-all centralization.

Though I give her credit for admitting that the purpose of harmonization is to force more spending, what she calls “upper convergence.” So we can add Ms. Thyssen to our list of honest statists.

And speaking of centralization, some politicians want to go beyond mandates and harmonization and also have EU-wide taxes and spending.

Here are some of the details from a report in the U.K.-based Guardian.

German and French politicians are calling for a…eurozone treasury equipped with a eurozone finance chief, single budget, tax-raising powers, pooled debt liabilities, a common monetary fund, and separate organisation and representation within the European parliament. …They call for the setting up of “an embryo euro area budget”, “a fiscal capacity over and above national budgets”, and harmonised corporate taxes across the bloc. The eurozone would be able to borrow on the markets against its budget, which would be financed from a kind of Tobin tax on financial transactions and also from part of the revenue from the new business tax regime.

By the way, this initiative to impose another layer of taxes and spending in Europe isn’t being advocated by irrelevant back-bench politicians. It’s being pushed by Germany’s Vice Chancellor and France’s Economy Minister!

Thankfully, not everyone in Europe is economically insane. Syed Kamall, a member of the European Parliament form the U.K.’s Conservative Party, is unimpressed with this vision of greater centralization, harmonization, and bureaucratization.

Here’s some of what he wrote in a column for the EU Observer.

The socialist dream that these two politicians propose would soon turn into a nightmare not just for the Eurozone, but for the entire EU. …Their socialist vision of harmonised taxation and more social policies sounds utopian on paper but it fails to accept a basic fact: that Europe is not the world, and Europe cannot close itself off from the world. …After several decades of centralisation in the EU, we have seen the results: …a failure to keep up with growing economic competitiveness in many parts of the world. …Specific proposals such as harmonised corporate taxes are nothing new from the socialists, but they would reduce European competitiveness. …With greater harmonisation Europe’s tax rate would only be as low as the highest-taxing member. …

Syed’s point about Europe not being the world is especially relevant because the damage of one-size-fits-all centralization manifests itself much faster when jobs and capital can simply migrate to other jurisdictions.

And while the Europeans are trying to undermine the competitiveness of other nations with various tax harmonization schemes, that’s not going to arrest Europe’s decline.

Simply stated, Europe is imposing bad policy internally at a much faster rate than it can impose bad policy externally.

P.S. Let’s close with some humor sent to me by the Princess of the Levant.

It features the libertarian character from Parks and Recreation.

And I even found the YouTube clip of this scene.

Which is definitely worth watching because of how Swanson explains the tax system.

I particularly like the part about the capital gains tax. It’s a good way of illustrating double taxation.

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There’s a big fiscal battle happening in Europe. The relatively new Greek government is demanding continued handouts from the rest of Europe, but it wants to renege on at least some of the country’s prior commitments to improve economic performance by reducing the preposterous burden of spending, regulation, and intervention.

That seems like a rather strange negotiating position. Sort of like a bank robber holding a gun to his own head and saying he’ll shoot himself if the teller doesn’t hand over money.

At first glance, it seems the Greeks are bluffing. Or being suicidally self-destructive.

And maybe they are posturing and/or being deluded, but there are two reasons why the Greeks are not totally insane.

1. The rest of Europe does not want a Greek default.

There’s a famous saying, attributed to J. Paul Getty, that applies to the Greek fiscal fight. Simply stated, there are lots of people and institutions that own Greek government bonds and they are afraid that their investments will lose value if Greece decides to fully or partially renege on its debts (which is an implicit part of Greece’s negotiating position).

So while Greece would suffer if it defaulted, there would be collateral damage for the rest of Europe. In other words, the hypothetical bank robber has a grenade rather than a gun. And while the robber won’t fare well if he pulls the pin, lots of other people may get injured by shrapnel.

And to make matters more interesting, previous bailouts of Greece have created a rather novel situation in that taxpayers are now the indirect owners of a lot of Greek government debt. As you can see from the pie chart, European taxpayers have the most exposure, but American taxpayers also are on the hook because the IMF has participated in the bailouts.

The situation is Greece is akin to a bankruptcy negotiation. The folks holding Greek government debt are trying to figure out the best strategy for minimizing their losses, much as the creditors of a faltering business will calculate the best way of extracting their funds. If they press too hard, the business may go bust and they get very little (analogous to a Greek default). But if they are too gentle, they miss out on a chance of getting a greater share of the money they’re owed.

2. Centralization is the secular religion of the European elite and they want Greece in the euro.

The bureaucrats at the European Commission and the leaders of many European nations are emotionally and ideologically invested in the notion of “ever closer union” for Europe. Their ultimate goal is for the European Union to be a single nation, like the United States. In this analogy, the euro currency is akin to the American dollar.

There’s a general perception that a default would force the Greek government to pull out of the euro and re-create its own currency. And for the European elite who are committed to “ever closer union,” this would be perceived as a major setback. As such, they are willing to bend over backwards to accommodate Greece’s new government.

Given the somewhat blurry battle lines between Greece and its creditors, what’s the best outcome for advocates of limited government and individual liberty?

That’s a frustrating question to answer, particularly since the right approach would have been to reject any bailouts back when the crisis first started.

Without access to other people’s money, the Greek government would have been forced to rein in the nation’s bloated public sector. To be sure, the Greek government may also have defaulted, but that would have taught investors a valuable lesson about lending money to profligate governments.

And it would have been better if Greece defaulted five years ago, back when its debt was much smaller than it is today.

But there’s no point in crying about spilt milk. We can’t erase the mistakes of the past, so what’s the best approach today?

Actually, the right answer hasn’t changed.

And just as there are two reasons why the Greek government is being at least somewhat clever in playing hardball, there are two reasons why the rest of the world should tell them no more bailouts.

1. Don’t throw good money after bad.

To follow up on the wisdom of J. Paul Getty, let’s now share a statement commonly attributed to either Will Rogers or Warren Buffett. I don’t know which one (if either) deserves credit, but there’s a lot of wisdom in the advice to stop digging if you find yourself in a hole. And Greece, like many other nations, has spent its way into a deep fiscal hole.

There is a solution for the Greek mess. Politicians need to cut spending over a sustained period of time while also liberalizing the economy to create growth. And, to be fair, some of that has been happening over the past five years. But the pace has been too slow, particularly for pro-growth reforms.

But this also explains why bailouts are so misguided. Politicians generally don’t do the right thing until and unless they’ve exhausted all other options. So if the Greek government thinks it has additional access to money from other nations, that will give the politicians an excuse to postpone and/or weaken necessary reforms.

2. Saying “No” to Greece will send a powerful message to other failing European welfare states.

Now let’s get to the real issue. What happens to Greece will have a big impact on the behavior of other European governments that also are drifting toward bankruptcy.

Here’s a chart showing the European nations with debt burdens in excess of 100 percent of economic output based on OECD data. Because of bad demographics and poor decisions by their politicians, every one of these nations is likely to endure a Greek-style fiscal crisis in the near future.

And keep in mind that these figures understate the magnitude of the problem. If you include unfunded liabilities, the debt levels are far higher.

So the obvious concern is how do you convince the politicians and voters in these nations that they better reform to avoid future fiscal chaos? How do you help them understand, as Mark Steyn sagely observed way back in 2010, that “The 20th-century Bismarckian welfare state has run out of people to stick it to.

Well, if you give additional bailouts to Greece, you send precisely the wrong message to the Italians, French, etc. In effect, you’re telling them that there’s a new group of taxpayers from other nations who will pick up the tab.

That means more debt, bigger government, and a deeper crisis when the house of cards collapses.

P.S. Five years ago, I created a somewhat-tongue-in-cheek 10-step prediction for the Greek crisis and stated at the time that we were at Step 5. Well, it appears my satire is slowly becoming reality. We’re now at Step 7.

P.P.S. Four years ago, I put together a bunch of predictions about Greece. You can judge for yourself, but I think I was quite accurate.

P.P.P.S. A big problem in Greece is the erosion of social capital, as personified by Olga the Moocher. At some point, as I bluntly warned in an interview, the Greeks need to learn there’s no Santa Claus.

P.P.P.P.S. The regulatory burden in Greece is a nightmare, but some examples of red tape are almost beyond belief.

P.P.P.P.P.S. The fiscal burden in Greece is a nightmare, but some examples pf wasteful spending are almost beyond belief.

P.P.P.P.P.P.S. Since we once again have examined a very depressing topic, let’s continue with our tradition of ending with a bit of humor. Click here and here for some very funny (or sad) cartoons about Obama and Greece. And here’s another cartoon about Greece that’s worth sharing. If you like funny videos, click here and here. Last but not least, here’s some very un-PC humor about Greece and the rest of Europe.

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I wrote the other day that Americans, regardless of all the bad policy we get from Washington, should be thankful we’re not stuck in a hellhole like Venezuela.

But we also should be happy we’re not Europeans. This is a point I’ve made before, usually accompanied by data showing that Americans have significantly higher living standards than their cousins on the other side of the Atlantic.

It’s now time to re-emphasize that message. The European Commission has issued its annual report on “Taxation Trends” and it is – at least for wonks and others who care about fiscal policy – a fascinating and compelling document.

If you believe in limited government, you’ll read the report in the same way you might look at a deadly traffic accident, filled with morbid curiosity and fear that you may eventually suffer the same fate.

But if you’re a statist, you’ll read the report like a 14-year old boy with his first copy of a girlie magazine, filled with fantasies about eventually getting to experience what your eyes are seeing.

Let’s start by giving the bureaucrats some credit for self-awareness. They openly admit that the tax burden is very onerous in the European Union.

The EU remains a high tax area. In 2012, the overall tax ratio, i.e. the sum of taxes and compulsory actual social contributions in the 28 Member States (EU-28) amounted to 39.4 % in the GDP-weighted average, nearly 15 percentage points of GDP over the level recorded for the USA and around 10 percentage points above the level recorded by Japan. The tax level in the EU is high not only compared to those two countries but also compared to other advanced economies; among the major non-European OECD members for which recent detailed tax data is available, Russia (35.6 % of GDP in 2011) and New Zealand (31.8 % of GDP in 2011) have tax ratios exceeding 30 % of GDP, while tax-to-GDP ratios for Canada, Australia and South Korea (2011 data) remained well below 30 %.

Here’s a chart from the report showing that taxes consume about 40 percent of economic output in EU nations. And while Americans correctly view the internal revenue code as very burdensome, taxes “only” consume about 25 percent of GDP in the United States.

EU Report Total Tax

Other nations with comparatively modest tax burdens include Canada (CA), Australia (AU), South Korea (KR), and Switzerland (CH).

But it’s important to understand that not all nations in the European Union are identical.

Just as there are high-tax states and low-tax states in America, there are high-tax countries and low-tax countries in Europe. Surprisingly, France was not the worst nation.

…the ratio of 2012 tax revenue to GDP was highest in Denmark, Belgium and France (48.1 %, 45.4 % and 45.0 % respectively); the lowest shares were recorded in Lithuania (27.2 % of GDP), Bulgaria (27.9 % of GDP) and Latvia (27.9 % of GDP).

I’m surprised, by the way, that Sweden isn’t among the highest-taxed nations. I guess they’ve made even more progress than I thought.

Now let’s drill down into the report and look at some of the specific data.

But you may want to stop reading now if you get easily depressed.

That’s because it’s time to look at a chart showing what’s happened to income tax rates. Specifically, this chart shows the average top tax rate on personal income, both for Eurozone (nations using the euro currency) and European Union nations.

As you can see, the average top tax rate has jumped by almost four percentage points for euro nations and by about two percentage points for all EU nations.

EU Report Personal Income Tax

This is very unfortunate. Tax rates were heading in the right direction when there was vigorous tax competition inside Europe. But now that high-tax nations have been somewhat successful in forcing low-tax jurisdictions to become deputy tax enforcers, that positive trend has halted and policy is moving in the wrong direction.

But not in all regards.

Tax competition also has been compelling governments to lower corporate tax rates. And while that trend has abated, you can see in this chart that politicians haven’t felt they have leeway to push rates higher.

EU Report Corporate Income Tax

Though I am very concerned about the OECD’s campaign to undermine corporate tax competition.

If they’re successful, there’s no doubt we’ll see higher corporate tax rates.

Let’s now look at some more depressing data. This chart shows that a continuation in the trend toward higher rates for value-added taxes (VATs).

EU Report VAT

I’ve warned repeatedly that the VAT is a money machine for big government and the EU data certainly supports my position.

But if you want evidence from other parts of the world, there’s some IMF data that clearly shows how politicians use the VAT to expand the burden of government.

Last but not least, let’s now draw some conclusions from all this information.

At the beginning of the column, I mentioned that Americans should not copy Europe because bigger government translates into lower living standards.

Simply stated, there’s a negative relationship between the size of government and economic performance.

So let’s look at another piece of data to emphasize that point. The bureaucrats at the OECD just did a report on the U.S. economy and they produced a chart showing that the current recovery is very anemic. We haven’t recaptured lost economic output, which normally happens after a downturn. Indeed, we haven’t even returned to normal growth levels.

But that’s not news to regular readers. I’ve shared powerful data from the Minneapolis Federal Reserve showing the failure of Obamanomics.

What is noteworthy, though, is comparing Europe to the United States. As you can see from these two charts, euro nations have flat lined. And if you look at the vertical scale, you can see that they were growing a lot slower than the United States to begin with.

Dismal European Economy

In other words, we’re not doing very well in the United States.

But compared to Europe, we’re Hong Kong.

Two final caveats: First, I always like to stress that economic performance is impacted by a wide range of policies. So while I think that rising tax burdens and higher tax rates are hurting growth in Europe, there are other factors that also matter.

Second, any analysis of fiscal policy should also include data on the burden of government spending. After all, a nation with a low tax burden will still suffer economic problems if there’s a large public sector financed by red ink.

And one big warning: Obama wants to make America more like Europe. If he succeeds, we can expect European-style stagnation.

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What’s the defining characteristic of our political masters?

Going all the way back to when they ran for student council in 6th grade, is it a craven desire to say or do anything to get elected?

Is it the corrupt compulsion to trade earmarks, loopholes, and favors in exchange for campaign cash?

Or is it the knee-jerk desire to buy votes by spending other people’s money?

The answer is yes, yes, and yes, but I want to add something else to the list.

One of the most odious features of politicians is that they think they’re entitled to all of our money. But it goes beyond that. They also think they’re doing us a favor and being magnanimous if they let us keep some of what we earn.

Think I’m joking or exaggerating?

Consider the fact that the crowd in Washington says that provisions in the internal revenue code such as IRAs are “tax expenditures” and should be considered akin to government spending.

So if you save for retirement and aren’t subject to double taxation, you’re not making a prudent decision with your own money. Instead, you’re the beneficiary of kindness and mercy by politicians that graciously have decided to give you something.

And the statists at the Washington Post will agree, writing that folks with IRAs are getting “a helping hand” from the government.

Or if you have a business and the government doesn’t impose a tax on your investment expenditures, don’t think that you’re being left alone with neutral tax policy. Instead, you should get on your knees and give thanks to politicians that have given you a less-punitive depreciation schedule.

And the Congressional Budget Office, the Joint Committee on Taxation, and the Government Accountability Office will all agree, saying that you’re benefiting from a “tax expenditure.”

The same attitude exists in Europe. But instead of calling it a “tax expenditure” when taxpayers gets to keep the money they earn, the Euro-crats say it is a “subsidy” or a form of “state aid.”

Speaking at the European Competition Forum in Brussels, EU commissioner Joaquin Almunia said he would investigate whether moves by national governments to tailor their tax laws to allow companies to avoid paying tax had the same effect as a subsidy. Subsidising certain businesses could be deemed as anti-competitive, breaching the bloc’s rules on state aid. …The remarks by the Spanish commissioner’s, who described the practice of “aggressive tax planning” as going against the principles of the EU’s single market, are the latest in a series of salvos by EU officials aimed at clamping down on corporate tax avoidance. …He added that the practice “undermines the fairness and integrity of tax systems” and was “socially untenable.”

Needless to say, Senor Almunia’s definition of “fairness” is that a never-ending supply of money should be transferred from taxpayers to the political elite.

The head of the Paris-based Organization for Economic Cooperation and Development wants to take this mentality to the next level. He says companies no longer should try to legally minimize their tax burdens.

International technology companies should stop considering it their “duty” to employ tax-dodging strategies, said Angel Gurria, head of the Organization for Economic Cooperation and Development. …The OECD, an international economic organization supported by 34 member countries including the U.S., U.K., Germany and Japan, will publish the results of its research on the issue for governments to consider within the next two years, Gurria said.

And you won’t be surprised to learn that the OECD’s “research on the issue” is designed to create a one-size-fits-all scheme that will lead to companies paying a lot more tax.

But let’s think about the broader implications of his attitude about taxation. For those of us with kids, should we choose not to utilize the personal exemptions when filling out our tax returns? Should we keep our savings in a regular bank account, where it can be double taxed, instead of an IRA or 401(k)?

Should we not take itemized deductions, or even the standard deduction? Is is somehow immoral to move from a high-tax state to a low-tax state? In other words, should we try to maximize the amount of our income going to politicians?

According to Mr. Gurria, the answer must be yes. If it’s bad for companies to legally reduce their tax liabilities, then it also must be bad for households.

By the way, it’s worth pointing out that bureaucrats at the OECD – including Gurria – are completely exempt from paying any income tax. So if there was an award for hypocrisy, he would win the trophy.

P.S. Switching topics to the NSA spying controversy, here’s a very amusing t-shirt I saw on Twitter.

The shirt isn’t as funny as the Obama-can-hear-you-now images, but it makes a stronger philosophical point.

P.P.S. Let’s close with an update on people going Galt.

I wrote with surprise several years ago about the number of people who were giving up American citizenship to escape America’s onerous tax system.

But that was just the beginning of a larger trend. The numbers began to skyrocket last year, probably in part the result of the awful FATCA legislation.

Well, we now have final numbers for 2013.

Expats_1998_2013

What makes these numbers really remarkable is that expatriates are forced to pay punitive exit taxes before escaping the IRS.

Which is why there are probably at least 10 Americans who simply go “off the grid” and move overseas for every citizen who uses the IRS process to officially expatriate.

Not exactly a ringing endorsement of Obamanomics.

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I’m not a big fan of the European Commission. For those not familiar with this entity, it’s sort of the European version of the executive-branch bureaucracy we have in Washington. And like their counterparts in Washington, the Brussels-based bureaucracy enjoys a very lavish lifestyle while pushing for more government and engaging in bizarre forms of political correctness.

But just as a stopped clock is right twice a day, it appears that the European Commission is right once every century. Or perhaps once every millennium would be more accurate. Regardless, here are parts of a story I never thought would appear in my lifetime.

Olli Rehn: “Taxes shouldn’t be any higher than this”

According to the UK-based Independent, the European Commission – or at least one European Commissioner – now realizes that there’s such a thing as too much tax.

Tax increases imposed by the Socialist-led government in France have reached a “fatal level”, the European Union’s commissioner for economic affairs said today. Olli Rehn warned that a series of tax hikes since the Socialists took power 14 months ago – including €33bn in new taxes this year – threatens to “destroy growth and handicap the creation of jobs”.

Wow, that sounds like something I might have said.

But even though I endorsed him, Hollande has ignored my advice.

President Hollande has kept his electoral promise to attack French deficits and accumulated debt. He has done so, however, almost entirely by tax increases rather than by cuts in a state apparatus which swallows 56.6 per cent of the country’s GDP.

It’s worth noting, by the way, that tax hikes haven’t worked. Deficits today are still far higher than they were before the financial crisis. Yet the crazy French are not slowing down.

it has emerged that final budget plans for 2014 will include at least €6bn in tax rises. This figure does not include the impact of a programmed rise in the basic rate of VAT from 19.6 per cent to 20 per cent from January next year. …Mr Hollande’s 75 per cent “temporary” tax on incomes over €1m – also blocked by constitutional objections – may also finally take effect in 2014.

Geesh, no wonder even European bureaucrats are saying enough is enough.

Just like the IMF said that Greece had reached the tipping point where taxes were too high.

Just like the United Nations acknowledged the Laffer-Curve insight that taxes can be too high.

Just like the OECD admitted that better tax policy leads to more taxable income.

Just like the European Central Bank found big Laffer-Curve responses to changes in tax policy.

Hmmm…, makes you begin to think there’s a pattern and that people finally understand the Laffer Curve. Though let’s not get too optimistic since this common-sense observation about tax rates, taxable income, and tax revenue has not had any impact on the pro-tax bureaucrats at the Joint Committee on Taxation in Washington. But that’s a separate story.

I feel guilty about writing something favorable about the European Commission, so I want to close with some information showing that this bureaucracy is on the wrong side more than 99 percent of the time. Which should surprise anyone since it is headed by a former Maoist (who is eminently forgettable – other than the fact that he is unintentionally engaged in a contest to see who can be the most laughable European bureaucrat).

Let’s look at some highlights from the past few years.

European Commission bureaucrats lash out at credit rating companies for warning that governments may not be able to pay their bills.

European Commission bureaucrats squander millions of dollars on empty political correctness as they publish calendars that omit Christmas.

European Commission bureaucrats pissed away millions of dollars to create a green-skinned “Mr. Fruitness” superhero.

European Commission bureaucrats wasted money on comic books portraying themselves as super heroes.

But let’s set aside their perks and boondoggles and instead look at the bad policies generated by this army of paper pushers.

The European Commission pushes for tax harmonization because it is “unfair” for some nations to have lower taxes.

The European Commission advocates gender quotas at private businesses.

The European Commission is hostile to entrepreneurship and supports ever-higher levels of regulation and red tape.

The European Commission supports higher taxes as a “solution” to overspending by national governments.

The European Commission has decided that taxpayer-funded vacations are a human right.

The European Commission finances killing ducks at the absurd price of $750 each.

In other words, the crowd in Brussels is just as wasteful as the folks in Washington. And just as profligate as the people in Paris. And just as reckless as the group in London. And…well, you get the idea.

P.S. While the purpose of this post is to congratulate the European Commission on a rare bit of sanity, it’s worth noting that there’s another bureaucracy in Brussels called the European Parliament. I don’t think they’ve ever displayed any evidence of sanity. But since it doesn’t have much power, it also has little opportunity to do really stupid things. That being said, they enjoy a level of pampering that must make American lawmakers green with envy.

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It is reported that Henry Kissinger, commenting on the Iran-Iraq war, said something to the effect that, “Too bad both sides can’t lose.” I imagine lots of people felt the same way when two of the world’s worst murderers, Hitler and Stalin, went to war in 1941.

I have the same attitude about the fiscal fight in Europe. On one side, you have “austerity” proponents of higher taxes. On the other side, you have Keynesians who think a higher burden of government spending will produce growth.

Since I want lower spending and lower taxes, I have a hard time cheering for either group. As I say in this John Stossel interview, “there’s nobody in Europe who’s actually advancing that position that…the transfer of resources from the private sector to the government…is what hurts your economy.”*

But at least the fight is entertaining, especially since former allies at the International Monetary Fund and European Commission are now in a public spat.

Here are some blurbs from a New York Times report.

…tensions…have now burst into the open with an unusual bout of finger-pointing over policies that have pushed parts of Europe into an economic slump more severe than the Great Depression and left the Continent as a whole far short of even Japan’s anemic recovery. The blame game [was] initiated by a highly critical internal I.M.F. report released this week in Washington… Speaking Friday at an economic conference in his home country of Finland, Mr. Rehn, the usually phlegmatic commissioner of economic and monetary affairs, sounded like a put-upon spouse in a messy breakup. “I don’t think it’s fair and just for the I.M.F. to wash its hands and throw dirty water on the Europeans,” he said. He was responding to assertions by the I.M.F. that the European Commission, the union’s executive arm, had blocked proposals back in 2010 to make investors share more of the pain by writing down Greece’s debt and, more generally, had neglected the importance of structural reforms to lift Europe’s sluggish economy. Simon O’Connor, Mr. Rehn’s spokesman, said the report had made some valid points, but he derided as “plainly wrong and unfounded” a claim that the commission had not done enough to promote growth through reform.

The most accurate assessment is that neither the IMF nor the European Commission have done much to promote growth. But that’s not changing now that the IMF is migrating more toward the Keynesian camp (jumping out of the higher-tax frying pan into the higher-spending fire).

A “hands-off” approach would have been the right way for the IMF and European Commission to deal with the fiscal crisis in Greece and other nations. Without access to bailout funds and having lost access to credit markets, profligate governments would have been forced to immediately balance their budgets.

This wouldn’t necessarily have produced good policy since many of the governments would have raised taxes (which they did anyhow!), but a few nations in Southern Europe may have done the right thing by copying the Baltic nations and implementing genuine spending cuts.

Let’s finish up this post by speculating on what will happen next. I’m actually vaguely hopeful in the short run, largely because governments have exhausted all the bad policy options. It’s hard to imagine additional tax hikes at this stage. Heck, even the IMF has admitted that nations such as Greece are at the point on the Laffer Curve where revenues go down.

Moreover, many of these governments have slowed the growth of spending in the past couple of years, and if they can maintain even a modest bit of fiscal discipline over the next few years, that should boost growth by shrinking government spending as a share of economic output.

But continued spending restraint is vital. The burden of government spending is still far too high in the PIIGS nations, even when merely compared to pre-crisis spending levels.

P.S. Paul Krugman has been the main cheerleader for the spend-more Keynesian crowd, but he has an unfortunate habit of screwing up numbers, as you can see from his work on Estonia, the United KingdomFrance, and the PIIGS.

P.P.S. I’m not a fan of the euro, but Europe’s common currency shouldn’t be blamed for the mess in Europe.

P.P.P.S. You can read my thoughts here on the Rogoff-Reinhart kerfuffle, which deals with many of the same issues as this post.

*To be fair, there are a few policy experts who understand that Europe’s problem is excessive government spending. Even European voters seem to recognize that spending needs to be cut. The challenge is getting a corrupt political class to make good choices.

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Very few people are willing to admit that they favor protectionism. After all, who wants to embrace a policy associated with the Great Depression?

But people sometimes say “I want free trade so long as it’s fair trade.” In most cases, they’re simply protectionists who are too clever to admit their true agenda

In the Belly of the Beast at the European Commission

There’s a similar bit of wordplay that happens in the world of international taxation, and a good example of this phenomenon took place on my recent swing through Brussels.

While in town, I met with Algirdas Šemeta, the European Union’s Tax Commissioner, as part of a meeting arranged by some of his countrymen from the Lithuanian Free Market Institute.

Mr. Šemeta was a gracious host and very knowledgeable about all the issues we discussed, but when I was pontificating about the benefits of tax competition (are you surprised?), he assured me that he felt the same way, only he wanted to make sure it was “fair tax competition.”

But his idea of “fair tax competition” is that people should not be allowed to benefit from better policy in low-tax jurisdictions.

Allow me to explain. Let’s say that a Frenchman, having earned some income in France and having paid a first layer of tax to the French government, decides he wants to save and invest some of his post-tax income in Luxembourg.

In an ideal world, there would be no double taxation and no government would try to tax any interest, dividends, or capital gains that our hypothetical Frenchman might earn. But if a government wants to impose a second layer of tax on earnings in Luxembourg, it should be the government of Luxembourg. It’s a simple matter of sovereignty that nations get to determine the laws that apply inside their borders.

But if the French government wants to track – and tax – that flight capital, it has to coerce the Luxembourg government into acting as a deputy tax collector, and this generally is why high-tax governments (and their puppets at the OECD) are so anxious to bully so-called tax havens into emasculating their human rights laws on financial privacy.

Now let’s see the practical impact of “fair tax competition.” In the ideal world of Mr. Šemeta and his friends, a Frenchman will have the right to invest after-tax income in Luxembourg, but the French government will tax any Luxembourg-source earnings at French tax rates. In other words, there is no escape from France’s oppressive tax laws. The French government might allow a credit for any taxes paid to Luxembourg, but even in the best-case scenario, the total tax burden on our hypothetical Frenchman will still be equal to the French tax rate.

Imagine if gas stations operated by the same rules. If you decided you no longer wanted to patronize your local gas station because of high prices, you would be allowed to buy gas at another station. But your old gas station would have the right – at the very least – to charge you the difference between its price and the price at your new station.

Simply stated, you would not be allowed to benefit from lower prices at other gas stations.

So take a wild guess how much real competition there would be in such a system? Assuming your IQ is above room temperature, you’ve figured out that such a system subjects the consumer to monopoly abuse.

Which is exactly why the “fair tax competition” agenda of Europe’s welfare states (with active support from the Obama Administration) is nothing more than an indirect form of tax harmonization. Nations would be allowed to have different tax rates, but people wouldn’t be allowed to benefit.

For more information, here’s my video on tax competition.

And if you want information about the beneficial impact of “tax havens,” read this excellent column by Pierre Bessard and watch my three-part video series on the topic.

P.S. The Financial Transaction Tax also was discussed at the meeting, and it appears that the European actually intend on shooting themselves in the foot with this foolish scheme. Interestingly, when presented by other participants with some studies showing how the tax was damaging, Mr. Šemeta asked why we he should take those studies seriously since they were produced by people opposed to the tax. Since I’ve recently stated that healthy skepticism is warranted when dealing with anybody in the political/policy world (even me!), I wasn’t offended by the insinuation. But my response was to ask why we should act like the European Commission studies are credible since they were financed by governments that want a new source of revenue.

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I’ve written many times about the foolishness of bailing out profligate governments (or, for that matter, mismanaged banks and inefficient car companies).

Bailouts reward bad past behavior, encourage bad future behavior, and make the debt bubble bigger – thus increasing the likelihood of deeper economic problems. At the risk of stating the obvious, there’s a reason for the second word in the “moral hazard” phrase.

But I’m not surprised that politicians continue to advocate more bailouts. The latest version is the “eurobond,” sometimes referred to as “fiscal liability sharing.”

It doesn’t matter what it’s called, though, since we’re talking about the foolish idea of having Germany (with a few other small nations chipping in) guaranteeing the debt of Europe’s collapsing welfare states. Here’s how the New York Times described the issue.

When European leaders meet on Wednesday to discuss the troubles of the euro zone, France’s president will press the issue of euro bonds, his finance minister said in Berlin on Monday. …Pierre Moscovici, France’s newly appointed finance minister, traveled to Berlin for talks with his counterpart, Wolfgang Schäuble. In a news conference after the closed-door meeting, both characterized the exchange as friendly and productive, but Mr. Moscovici acknowledged that the two men, and their governments, had real differences of opinion over pooling obligations to use the credit of the strongest European countries to prop up the weaker ones, an approach achieved through euro bonds.

The good news is that the German government is opposed to this idea.

Steffen Kampeter, was much more forthcoming in reiterating German opposition to any such proposal. Mr. Kampeter called the joint bonds “a prescription at the wrong time with the wrong side effects,” in an interview with German public radio. “The government has repeatedly made clear that collective state borrowing — that is, euro bonds — are no way to overcome the current crisis,” said Georg Streiter, a spokesman for Ms. Merkel on Monday. “It is still the case that the government rejects euro bonds.” …German policy makers say, euro bonds would be comparable to the United States’ agreeing to pay off Mexico’s debts, almost like a blank check for nations that are in trouble for overspending in the first place. “Euro bonds are not where the keys to heaven lie,” said Michael Hüther, director of the Cologne Institute for Economic Research, because it would “mix up risk” and act as a disincentive for less competitive economies to reform.

The bad news is that the Germans support other bad policies instead.

Ms. Merkel has signaled flexibility on some of Mr. Hollande’s ideas, including more financing for the European Investment Bank and redirecting unspent European Union funds to try to fight unemployment.

And even when Merkel opposes bad policies, she indicates she will change her mind if one bad policy is mixed with another bad policy!

…the German government is staunchly opposed to euro bonds until deeper integration and harmonization of budgetary and public spending policies have been achieved.

If Ms. Merkel genuinely believes that political and fiscal union will solve Europe’s problems, she’s probably ingesting illegal substances. Centralization of European government will have the same unfortunate pro-statist impact as centralization of American government in the 1930s and 1960s.

Integration and harmonization simply means voters in the rest of Europe will take German funds using the ballot box.

Not surprisingly, all of the international bureaucracies are on the wrong side of this issue. The NY Times story notes that the European Commission is using the fiscal crisis to push for more centralization.

The European Commission floated the idea of bonds issued jointly by euro zone governments in November, suggesting that such “stability bonds” could be created “in parallel” with moves toward closer fiscal union, rather than at the end of the process, as the German government prefers, to “alleviate tension” in sovereign debt markets. “From an economic point of view this makes sense,” a commission spokesman, Amadeu Altafaj, said Monday. “But at the end of the day this is a political decision that has to be taken by the member states of the euro area.” Mr. Altafaj added that “any form of common debt issuance requires a closer coordination of fiscal policies, moving toward a fiscal union, it is a prerequisite.”

And the Financial Times reports that the Organization for Economic Cooperation and Development, which is reflexively supportive of bigger government and more intervention, has endorsed eurobonds.

Mr Hollande…won backing from the OECD, which in its twice-yearly economic outlook specifically called for such bonds…“We need to get on the path towards the issuance of euro bonds sooner rather than later,” Pier Carlo Padoan, the OECD chief economist, told the Financial Times.

The fiscal pyromaniacs at the IMF also are pushing to make the debt bubble bigger according to the FT.

Christine Lagarde, the IMF chief, also called for more burden-sharing. Though she stopped short of explicitly backing euro bonds, she said “more needs to be done, particularly by way of fiscal liability sharing” – a thinly veiled reference to such debt instruments.

What makes this particularly frustrating is that American taxpayers provide the largest share of the subsidies that keep the IMF and OECD afloat. In other words, we’re paying for left-wing bureaucrats, who then turn around and push for bad policies that will result in bigger bailouts in the future.

Episodes like this make me understand why so many people believe in conspiracy theories. Folks watch something like this unfold and they can’t help but suspect that people in these governments and international bureaucracies want to deliberately destroy the global economy.

But as I’ve noted before, it’s not smart to believe conspiracies when corruption, incompetence, politics, ideology, greed, and self-interest provide better explanations for bad policy.

If the Europeans want to hit the self-destruct button, I’m happy to explain why it’s a bad idea, and I’m willing to educate them about better alternatives.

But I damn sure don’t want to subsidize their foolishness when they do the wrong thing.

P.S. It’s very appropriate to close this post with a link to this parody of Hitler complaining about debt crisis.

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It seems that there’s nothing but bad news coming from Europe. Whether we’re talking about fake austerity in the United Kingdom, confiscatory tax schemes in France, or bailouts in Greece, the continent seems to be a case study of failed statism.

But that’s not completely accurate. Every so often I highlight good news, such as Switzerland’s successful spending cap, Sweden’s shift to the right on spending, Germany’s wise decision not to be Keynesian, and Portugal’s admission that “stimulus” doesn’t work.

Admittedly, the good news from Europe is oftentimes merely the failure to do something bad. But I’ll take victories in any form.

And that’s why I’m happy that Austria and Luxembourg are blocking a misguided European Commission plan to undermine financial privacy in order to increase double taxation of income that is saved and invested.

Here are some cheerful passages from a story in the EU Observer.

“Completely unjustifiable … grossly unfair … a mystery” – the European Commission and the Danish EU presidency have given Austria and Luxembourg a tongue-lashing for protecting tax evaders. The harsh words came after the two countries on Tuesday (15 May) blocked the commission from holding talks with Switzerland on a new savings tax law designed to recoup some of the estimated €1 trillion a year lost to EU exchequers in tax fraud and evasion. Tax commissioner Algirdas Semeta in a press conference in Brussels said: “The position that Austria and Luxembourg have taken on this issue is grossly unfair. They are hindering 25 willing member states from improving tax compliance and finding additional sources of income.” …Danish economic affairs minister Margrethe Vestager took his side. “It is a mystery why we shouldn’t move on making people pay the taxes that they should pay,” she noted. She described Austria and Luxembourg’s decision as “unfortunate.” For their part, Luxembourg and Austria have declined to publicly explain why they are against the move. Semeta on Tuesday indicated they object to “automatic transfer” of tax data between EU countries and Switzerland, even though the alternative is trusting Switzerland to decide which data it gives and which it withholds. He added that automatic exchange is becoming the international gold standard in the field, with “the US moving in the same direction.”

The quote from the Danish economic affairs minister is especially nauseating. It’s not the “taxes that they should pay.” It’s the “taxes that greedy politicians demand.”

Good tax policy is predicated on the notion that there should not be a bias against income that is saved and invested. This is because double taxation undermines capital formation and thus reduces long-run growth.

Yet European politicians, like many of their American counterparts, are drawn to class warfare tax policy and can’t resist trying to penalize the “evil rich.”

So let’s tip our proverbial hats to Austria and Luxembourg. This is probably just a short-term victory over the unrelenting forces of statism, but let’s enjoy it while it lasts.

P.S. This European kerfuffle is a fight over tax competition vs. tax harmonization. To understand why financial privacy and fiscal sovereignty are desirable, watch the four-part video series at this post.

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There’s always been a simple and desirable solution to Europe’s fiscal crisis, but nobody in Europe wants to do the right thing because it means admitting the failure of big government and it would result in less power for the political elite.

So we get the spectacle of never-ending emergency summits as the political class blindly searches for some magical solution. Not surprisingly, the “solution” concocted by the latest gathering is not getting good reviews.

Here’s what Ambrose Evans-Pritchard wrote in the Daily Telegraph.

What remarkable petulance and stupidity. The leaders of France and Germany have more or less bulldozed Britain out of the European Union for the sake of a treaty that offers absolutely no solution to the crisis at hand, or indeed any future crisis. It is EU institutional chair shuffling at its worst, with venom for good measure. …There is no shared debt issuance, no fiscal transfers, no move to an EU Treasury, no banking licence for the ESM rescue fund, and no change in the mandate of the European Central Bank.

And here’s what Felix Salmon wrote for Reuters.

It all adds up to one of the most disastrous summits imaginable. A continent which has risen to multiple occasions over the past 66 years has, in 2011, decided to implode in a spectacle of pathetic ignominy. …Europe’s leaders have set a course which leads directly to a gruesome global recession, before we’ve even recovered from the last one. Europe can’t afford that; America can’t afford that; the world can’t afford that. But the hopes of arriving anywhere else have never been dimmer.

So why is everybody upset? For the simple reason that the supposed “solution” doesn’t address the immediate problem.

Europe’s short-run crisis is that the fear of default. Simply stated, governments have squandered so much money that they are now deeply in debt. As a result, investors no longer trust that they will get paid back (either on time or in full) if they buy bonds from various governments.

This is why interest rates on government debt are climbing and nations such as Greece, Ireland, and Portugal already have received direct bailouts. Moreover, the European Central Bank has been engaging in indirect bailouts of other welfare states such as Spain and Italy.

But these direct and indirect bailouts have simply made the debt bubble bigger.

Yet the new agreement from Europe’s political elite doesn’t deal with this crisis. Simply stated, there is no short-run bailout strategy, not even one that kicks the can down the road.

There are only four ways of dealing with the mess in Europe, one good and three bad.

1. No bailouts, thus forcing nations to do the right thing (like the Baltics) or letting them default. This imposes the costs on the people who created the mess, addresses the short-run crisis, and promotes good long-run policy.

2. Crank up the proverbial printing presses and have the European Central Bank buy up most of Europe’s dodgy debt. This imposes the costs on all consumers, addresses the short-run crisis, and promotes bad long-run policy.

3. Have the Germans (and some other northern Europeans) guarantee the debt of the less-stable welfare states, either through Euro-bonds or some other mechanism. This imposes the costs on taxpayers in Germany and other nations that have been more prudent, addresses the short-run crisis, and promotes bad long-run policy.

4. Have the Americans and the rest of the world bail out Europe’s welfare states via the International Monetary Fund. This imposes the costs on the entire world (with U.S. taxpayers picking up the biggest part of the tab), addresses the short-run crisis, and promotes bad long-run policy.

In a remarkable display of ignoring the elephant in the middle of the room, none of these options was selected.

Some people claim that the third option was used, but that’s whistling past the graveyard. Yes, there will be a €500 billion bail-out fund called the European Stability Mechanism at some point next year, but that simply replaces the current €440 billion European Financial Stability Facility. And nobody thinks the third option will be successful unless there is a multi-trillion euro bailout fund.

So if Europe’s politicians didn’t agree to deal with the problem, either with good policy or bad policy, what exactly did they do?

The agreement uses the short-run fiscal crisis as an excuse to propose permanent changes that will erode national sovereignty and impose more centralization, more harmonization, and more bureaucratization.

One can argue, though not very persuasively, that these changes will reduce the likelihood of fiscal crises in the future. But that’s not the same thing as coming up with a policy – good or bad – to deal with the immediate problem.

I’m not an expert on investing money, but I definitely won’t be surprised if financial markets (including the investors who want bad policy so they can be bailed out) react negatively to this latest faux agreement.

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I’m not a big fan of the rating agencies. I’ve warned in TV interviews that they generally wait too long before downgrading profligate governments.

So when the rating agencies finally catch up to everyone else and lower their outlook for failing welfare states such as Greece and Portugal, one would think that this would be seen as a useful – albeit late – warning sign. But European politicians are not very happy about this development. At the risk of mixing metaphors, they want everyone to keep their heads buried in the sand and to continue complimenting the emperor on his new clothes.

Here are some excerpts from a BBC report.

The European Commission has strongly criticised international credit ratings agencies following the downgrade of Portugal by Moody’s. The Commission said the timing of the downgrade was “questionable” and raised the issue of the “appropriateness of behaviour” of the agencies in general. Earlier, Greek Foreign Minister Stavros Lambridinis said the agencies’ actions in the debt crisis had been “madness”. Ratings agencies have downgraded Greece and Portugal many times recently. …German Finance Minister Wolfgang Schaeuble told a news conference that he wanted to “break the oligopoly of the ratings agencies” and limit their influence. …”The timing of Moody’s decision is not only questionable, but also based on absolutely hypothetical scenarios which are not in line at all with implementation,” said Commission spokesman Amadeu Altafaj. “This is an unfortunate episode and it raises once more the issue of the appropriateness of behaviour of credit rating agencies.” Commission President Manuel Barroso added that the move by Moody’s “added another speculative element to the situation”.

This is not the first time this has happened, by the way. Back in January, I mocked the President of the European Council for whining that “bond vigilantes” had the nerve and gall to demand higher interest rates to compensate for the risk of lending money to incontinent governments.

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I’ve already poked fun at Herman Van Rompuy, the nondescript über-bureaucrat who has risen to the non-elected post of European Council President. I’ve mocked Rompuy’s attempts to compete with other European politicians, and I encourage everyone to have a good laugh at this video of Van Rompuy getting eviscerated by a British MEP.

We now have a new reason to roll our eyes about Van Rompuy. He is whining about those mean, nasty bond traders who have decided that it is a somewhat risky proposition to lend money to Europe’s welfare states. Even though Van Rompuy has no experience with money (other than spending the fruits of other people’s labor), he imperiously thinks it is “absurd” to put Greece and Portugal in the same category as Ukraine and Argentina.

I guess he would prefer if everyone just pretended these countries were in good shape and able to pay their bills, sort of like a fiscal version of “The Emperor’s New Clothes.”

Here’s the relevant passage from an article in the EU Observer.

European Council President Herman Van Rompuy has lashed out at ‘bond vigilantes’ over the treatment of peripheral eurozone economies in recent months. Speaking in London after a meeting with Prime Minister David Cameron on Thursday (13 January), Mr Van Rompuy described recent events as “absurd” and said the likes of Greece and Portugal should not be treated the same as poor countries: “Recent market developments are sometimes rather strange. The spreads now show default risks for some eurozone countries bigger than for emerging countries like Ukraine or Argentina: that is absurd.”

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The contest between the United States and Europe for dumb public policy is always hard to judge. The Europeans tend to make more policy mistakes, though Obama certainly is giving them some stiff competition. America, by contrast, is prone to really inane bouts of political correctness. But perhaps the Europeans are catching up in that area.

Here’s something, for example, that sounds like it could have happened in San Francisco. The European Commission (the über bureaucracy of the European Union) sent out 3 million calendars to kids that mentioned significant holidays for the Muslim, Sikh, and Hindu religions, but omitted Christmas. Here’s an excerpt from the U.K.-based Guardian.

Italy has demanded that the European Commission recall millions of diaries that are being distributed to schoolchildren throughout the EU because they do not mention Christmas but they do give the dates of other religions’ festivals, such as Ramadan, the Islamic month of fasting, and Sikh, Hindu and Chinese feast days. …A Commission spokeswoman said it had “realised the absence of some important European religious holidays, in particular Christmas”. …But she gave no indication that Brussels would accede to Frattini’s demand to recall the diaries, which, according to the Italian daily Corriere della Sera, was contained in a letter to the commission’s president, Jose Manuel Barroso. …Some 3 million copies of the latest edition of the Europe Diary have been sent to schools. The commission’s spokeswoman said its main purpose was “inform young Europeans as consumers and citizens on issues like rights, choices as consumers [and] climate change”. …The commission…spokeswoman said it had cost €5.5m (£4.6m).

Being a fiscal policy wonk, I don’t worry too much about the War on Christmas. Yes, political correctness is nauseating, but it’s not as if the government is actually using coercion to stamp out Christmas. When I read stories like this, what catches my attention instead are disturbing details such as the hefty price tag of $7.2 million. Why is the European Commission squandering so much money on calendars? And once a decision has been made to waste money, why leave out Christmas? And why did they include extraneous material such as global warming propaganda?

Perhaps the moral of this story is that governments – and international bureaucracies such as the EC – have an amazing ability to squander money. Sometimes they waste money for PC reasons, sometimes for vote-buying reasons, and sometimes for corruption. All we know for sure is that taxpayers get lumps of coal in their stockings.

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I’m working on a serious blog post about European fiscal developments, but my research on that issue has alerted me to a couple of stories about President Jose Manuel Barroso that cry out for immediate mockery and abuse. Mr. Barroso, for those that don’t follow the exciting world of international bureaucracy, is the President of the European Commission. This is not an elected position (perish the thought of letting voters have a say in such matters!). Instead, he’s the chief bureaucrat of the sprawling Brussels-based euro-bureaucracy. The first story is from the EU Observer, which reports that the European Parliament actually wanted to fine members that didn’t suffer through Barroso’s Castro-esque three-hour speech on the state of the European Union. Amazingly, the MEPs didn’t file a human rights protest against this proposed form of torture, but they did stage an internal revolt and the authorities backed down.

European parliament authorities have bid a hasty retreat from a tentative proposal to fine for non-attendance of today’s State of the Union speech after the idea was met with derision and anger by MEPs. A meeting yesterday (6 September) evening of parliament president Jerzy Buzek and the 14 vice presidents of the EU assembly abandoned an idea to check up on just who was listening to European Commission president Jose Manuel Barroso’s speech and the ensuing debate. …The original proposal agreed by the assembly’s political groups late last week envisioned three electronic checks over the three hour slot and a small fine for MEPs whose absence was registered twice. A short debate on the issue before the presidential meeting already showed the way the wind was blowing. UK Liberal MEP Baroness Sarah Ludford called the idea a “massive own goal” adding: “You have damaged the reputation of the European Union and indeed President Barroso.”

Mr. Barroso obviously is not happy about the fact that nobody knows who he is or cares what he has to say, because the next story is from the Telegraph, which reports that Barroso’s staff is being dramatically expanded in an effort to “boost his media and political profile.” But this is not just an example of how international bureaucrats waste taxpayer money. There’s also a very offensive and reprehensible plan to corrupt journalists by paying the expenses of reporters traveling with Europe’s deservedly-invisible chief bureaucrat.

Jose Manuel Barroso, the former Portuguese prime minister, will also have a photographer and television producer available 24 hours a day, as well as the services of a team of four speechwriters to call on at all times, under the new strategy to boost his media and political profile. The new measures to “personalise” his image were revealed in a leaked letter written by Viviane Reding, the Justice Commissioner, who is in charge of EU communications. ….The EU has already come under fire for spending more than €8 million euros on entertaining, “training” and “informing” individual journalists last year, and devoted particular attention to those from Ireland in the run up to that country’s referendum on the Lisbon Treaty. …The package of measures include a team of eight staff to update his website, monitoring and rebuttal of blogs criticising the EU, rapid verbatim transcripts of all the Commission president’s public remarks – and, from next month, a plan to pay the costs of reporters travelling with Mr Barroso or other commissioners to “important meetings abroad”.

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If misery loves company, we can be very happy with these two stories about over-compensated bureaucrats from outside our borders. The first comes from Europe, where the Daily Telegraph reports that pension costs are skyrocketing for bureaucrats with the European Commission and other European Union entities. With the average pension being more than $88,000 per year, that’s hardly a surprise. This adds injury to injury since EU bureaucrats already get paid much more than workers in the productive sector of the economy.

Internal estimates, seen by The Daily Telegraph, show huge cost increases as growing numbers of officials in an expanded EU qualify for retirement, often at a younger age than the taxpayers who fund their generous pensions. Over the next three years alone, the cost of EU civil service pensions is expected to rise by 16 per cent to an annual bill for taxpayers of £1.3 billion. … EU officials are allowed to retire at the age of 63, younger than Britons who have just had their retirement age increased from 65 to 66 by 2016. …According to unpublished Commission figures, the pension bill will by 2040 risen 97 per cent to over £2 billion, with a British contribution of over £350 million. …The average annual pension pocketed by the 17,471 retired eurocrats benefiting from the scheme is £57,194, while the highest ranking officials can pocket pensions of over £102,000.

Our second story comes from the Cayman Islands, where bureaucrats (as well as some politicians) have figured out the double-dipping scam, getting a lucrative pension while still receiving a salary. But the Cayman Islands at least deserve credit for limiting the damage. All bureaucrats hired after 1999 participate in a mandatory savings system, thus limiting the long-run risk for taxpayers.

A significant number of employees in the Cayman Islands Civil Service receive a monthly pension as well as a salary, according to records obtained by the Caymanian Compass. There are 65 people who have retired from the civil service under the defined benefit pension programme – which means they are receiving a monthly pension while continuing to work in government, according to information from a Freedom of Information request made by the Compass. Those workers are typically employed on a fixed-term contract and, therefore, also receive a salary. …There were 171 employees working in the civil service who were age 60 or over at the date the Compass made its open records request. The ability of civil servants and Cayman Islands legislators to ‘double dip’ is not to the liking of at least one lawmaker, who raised the issue in the Legislative Assembly in June. North Side MLA Ezzard Miller told the assembly that a change in the parliamentary pensions law in recent years has allowed elected officials to receive the same benefit as civil servants – to retire while continuing to serve in the assembly. In essence, Mr. Miller said, those lawmakers can “get a double dip” – continue to receive their salaries while earning a pension at the same time. …Cayman Islands civil servants who joined the service after mid-April 1999 no longer receive defined benefit pension payments. In other words, the newer civil service employees will receive a lump sum payment from their pension funds rather than a monthly pension.

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I never thought “penile implant” was a term I would use on this blog, but that’s because I never thought I would read a story about taxpayer funding of the procedure. The only good news is that this is a story about fringe benefits for the politicians and bureaucrats in Brussels, so European taxpayers are being raped (no pun intended) rather than American taxpayers. But phallic implants are just the tip (no pun intended) of the iceberg. European taxpayers also provide unlimited viagra, heroin replacement drugs such as methadone, and mud baths to the euro-crat elite. Even American politicians haven’t figured out how to bilk taxpayes like this (or, if they have, they are clever enough to keep the information hidden).

EURO MEPs can claim for viagra on their health insurance – and the taxpayer picks up the bill. All Brussels officials and politicians can get the sex aid drug for free if needed. They can even claim for heroin replacement methadone under the European Commission scheme. Other free options include willy implants, the UK Independence Party discovered. Marta Andreasen, an MEP for the party, said: “It is utterly bonkers what British taxpayers are funding for Eurocrats. “Surely if they want these things, they should be able to pay themselves. It is a total waste of taxpayers’ cash.” …Last year it was revealed MEPs receive public funding for massages and feng shui. Other perks which qualify include mud baths, hydromassage and mild electric shock treatment. The TaxPayers’ Alliance last night blasted the wasteful perks in Brussels. Spokesman Matthew Sinclair said: “Taxpayers expect to see their money spent on providing essential services, not Viagra. The Government should insist on a better deal from Brussels.”

P.S. I’m very proud of myself for resisting the impulse to make jokes about “stimulus.”

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It’s aggravating and maddening to send tax dollars to Washington and watch them get wasted on pork-barrel projects and inefficient programs. Imagine how much worse it would be, though, to send tax dollars to an international bureaucracy and be utterly helpless to stop the worst kinds of boondoggle spending. That’s how taxpayers from European nations must feel when they discover, as the Daily Mail reveals, that the European Commission bureaucrats squandered close to $20 million to conclude that fruit is a healthy food and to create a “Mr. Fruitness” superhero character.

EU bureaucrats have squandered millions of pounds on a study which reached the unsurprising conclusion that fruit is good for you. An astonishing 13.8million euros – some £11.7million – has been spent on research involving 200 scientists which found that ‘two apples a day keep cholesterol at bay’. Much of the money went on developing and promoting a green-skinned EU superhero called Mr Fruitness designed to persuade children to eat more fruit. …The multi-million pound project called IsaFruit lasted four years. …The website set up to publicise Mr Fruitness…describes him as ‘a superhero with special powers that come from the nutritional substances in fruit – vitamins and others; key components of an intelligent and conscious diet’.

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Many people assume that Europe is the land of high-tax welfare states and America is an outpost of laissez-faire capitalism. We should be so lucky. The burden of government in America is still lower than it is in the average European nation, but the United States is a lot closer to France than it is to Hong Kong – and the trend is not comforting.

We recently endured the embarrassing spectacle of President Obama arguing with Europeans that they should increase the burden of government spending. Now we have a new report from the European Commission indicating that the average corporate tax rate in member nations of the European Union has plummeted to just 23.5 percent while the corporate tax rate in the U.S. has stagnated at 35 percent. In the past dozen years alone, as the chart illustrates, the average corporate tax rate in the European Union has dropped by nearly 12 percentage points. To make matters worse, the corporate tax rate in America actually is closer to 40 percent if state tax burdens are added to the mix.

This is not to say that European politicians are reading Hayek and Friedman (or watching Dan Mitchell videos on corporate taxation). Almost all of the positive reforms are because of tax competition. Thanks to globalization, it is increasingly easy for labor and (especially) capital to cross national borders to escape bad policy. As such, nations now have to compete for jobs and investment, and this liberalizing process is particularly powerful among nations that are neighbors.

Not surprisingly, European politicians despise tax competition and instead would prefer to impose a one-size-fits-all policy of tax harmonization. These efforts to create a tax cartel have a long history, beginning even before Reagan and Thatcher lowered tax rates and triggered the modern era of tax competition. The European Commission originally wanted to require a minimum corporate tax rate of 45 percent. And as recently as 1992, there was an effort to require a minimum corporate tax rate of 30 percent.
Fortunately, the politicians did not succeed in any of these efforts. As such, tax competition remains alive and corporate tax rates continue to fall. What remains to be seen, however, is whether America will join the race to lower corporate tax rates – and more jobs and investment.

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Europe’s economy is stagnant, the euro currency is in danger of collapse, and many nations are on the verge of bankruptcy. But one thing you can count on in this time of crisis is for prompt, thoughtful, and intelligent action by the super-bureaucrats of the European Commission. Right? Well, maybe not. You can be confident, however, that they will generate idiotic regulations that increase costs and trample national sovereignty. The latest example is some new red tape that will prohibit grocers from selling items based on numerical quantity. I’m not joking. Here’s a blurb from the UK-based Telegraph:
Under the draft legislation, to come into force as early as next year, the sale of groceries using the simple measurement of numbers will be replaced by an EU-wide system based on weight. It would mean an end to packaging descriptions such as eggs by the dozen, four-packs of apples, six bread rolls or boxes of 12 fish fingers. …The changes would cost the food and retail industries millions of pounds as items would have to be individually weighed to ensure the accuracy of the label. Trade magazine, The Grocer, said food industry sources had described the move as “bonkers” and “absolute madness”. Its editor, Adam Leyland, said the EU had “created a multi-headed monster”. Caroline Spelman said: “This goes against common sense. Shopkeeping is a long standing British tradition and we know what customers want. They want to buy eggs by the dozen and they should be allowed to – a point I shall be making clear to our partners in Europe.” …Andrew Opie, food director of the British Retail Consortium, which represents 90 per cent of UK shops, said: “This is a bad proposal – we need to help consumers, not confuse them.”

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If misery loves company, then American and English taxpayers can enjoy a bonding experience after reading this story about excessive pay for bureaucrats in Brussels. According to the Daily Telegraph, at least 1,000 (and probably more than 2,000) of these euro-crats earn more than the U.K. Prime Minster.

More than one thousand EU officials earn more than the Prime Minister, according to research carried out by the The Daily Telegraph. …Included in the overall total are Herman Van Rompuy, the EU president, Baroness Ashton, Europe’s foreign minister, José Manuel Barroso, the European Commission President along with six vice-presidents and 19 commissioners. This group of 28 people, who are all unelected, earn £57,000 to £103,000 more than Mr Cameron and include the three best paid politicians, Mr Van Rompuy, Mr Barroso and Lady Ashton, in the western world. Among the 995 European civil servants, who are on the AD14 to AD16 grades earning £146,267 to £179,703, are at least 90 unelected British EU officials earning more than the Prime Minister. The Commission has admitted that the true numbers cannot be calculated and could be at least twice as high. After tax relief and generous perks are taken into account it is likely that over 2,000 officials are earning more than Mr Cameron. …Research and information requests have also found that there are 19 European Parliament assistants, or researchers to MEPs, who earn £75,752 a year. Another 12 assistants, eligible along with EU officials for low tax rates, pocket £70,217 a year. A British MP in the House of Commons earns just £65,738.

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It’s been amusing, in an I-told-you-so fashion, to follow the fiscal crises in Greece, Spain, and other European welfare states.And I feel like a voyeuristic ghoul as I observe the incredibly misguided bailout policies being adopted by the political elites (who are trying to bail out the business elites who made silly loans to corrupt nations in Southern Europe). But I’m not sure how to describe my emotions (dumbfounded fascination?) about the latest bad idea emanating from Europe – to have a fiscal federation that would give bureaucrats in Brussels power over national budgets. It’s quite possible that this would result in some externally-imposed discipline for a basket case such as Greece, so it would not always lead to terrible results. But most of the decisions would be bad, particularly since the Euro-crats would use new powers to curtail tax competition in order to enhance the ability of governments to impose bad tax policy in order to seize more money. Moreover, fiscal centralization would exacerbate the main problem in Europe by creating a new avenue – cross-border subsidies – for people who want to mooch by getting access to other people’s money. The Wall Street Journal Europe has a good editorial on the issue:
Of all the possible responses to Europe’s sovereign debt woes, the notion of centralizing fiscal authority in Brussels may well be the most destructive. But that was exactly what European Central Bank President Jean-Claude Trichet proposed in testimony before the European Parliament Monday. Mr. Trichet’s idea is that an independent body within the European Commission should have broad power to sanction national governments for fiscal or macroeconomic policies that threatened the stability of the euro. This would amount, in Mr. Trichet’s words, to the “equivalent of a fiscal federation” for the euro zone. Mr. Trichet has spent nearly 40 years as a civil servant in one form or another, which may explain his belief that Europe’s budgetary problems can be solved by technocrats. …Fiscal centralization would also undermine competition between different fiscal and macroeconomic policies within the euro zone. That would delight some countries, and probably some at the European Commission as well. During this crisis, French Finance Minister Christine Lagarde has criticized Germany for becoming too competitive for the euro zone’s own good. And a decade ago, France was among the euro-zone countries that attacked Ireland for lowering its corporate income-tax rate to 12.5% to attract investment. …Ireland’s 12.5% corporate tax rate was an experiment that contributed to a lowering of rates around the world in the succeeding years.

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President Andrew Jackson is believed to have said that “One man with courage makes a majority.” Well, let’s hope this statement also applies to women. The incoming Prime Minister of Slovakia, Ms. Iveta Radicova, has the power to stop the corrupt and misguided European bailout scheme. At one point, Irish voters had the power to stop more centralization, bureaucratization, and harmonization in Brussels. Then the President of the Czech Republic had the opportunity to derail the movement to a socialist superstate in Brussels. In both cases, the forces of statism eventually prevailed. The bailout is a different issue, but the underlying issues are the same. Should nations have both the sovereign right to determine their own policies and should they also have the responsibility of dealing with the consequences of those actions? Here’s a blurb from the EU Observer about whether Slovakia will save Europe from the political elites:

The emerging new leadership in Slovakia has said the country will not contribute its share of the €110 billion rescue package for Greece. In addition, Bratislava is likely not to add its signature to the €750 billion eurozone support mechanism – something that could put the entire project on ice. …”It would be a serious blow to the EFSF and the euro area’s ability to stand behind its members [if a member does not sign],” a senior eurozone official told this website. He explained that all 16 signatures on the document – which specifies provisions on how to issue loan guarantees if necessary – are required to bring the emergency mechanism to life. …Conservative politician Iveta Radicova, the likely next prime minister, described the bloc’s €750 billion rescue fund during the pre-election debates as “bad, dangerous and [the] worst possible solution.” On Tuesday (15 June), Ms Radicova also re-iterated that she is against Slovakia providing any financial support to Greece.

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I don’t often agree with the statist president of the European Commission, but Mr. Barroso may be right when he warns that some nations are at risk of descending back into dictatorship. But while he may be correct in his diagnosis, his proposed solution is more of the policies – redistribution, handounts, bailouts, and subsidies – that have caused nations to get in trouble in the first place. At best, this approach postpones the day of reckoning – but it also causes a much bigger collapse.

During my recent visits to Europe, I was surprised by the level of pessimism from all segments of the population. The general assessment is that Europe is heading downhill and that there is little hope of changing direction because too many people have been convinced by politicians that they are entitled to mooch. But, as Margaret Thatcher famously warned, the problem with socialism is that you eventually run out of other people’s money. That is what is happening in Europe. But rather than sober up, the Greeks and others are rioting in hopes of finding new victims to consume. Many people I talked to expressed concern that this attitude eventually would cause economic collapse and lead to some sort of anti-democratic rule. The optimists (if you can call them that) think the result may be some sort of soft despotism dictated by Brussels and enforced by bribes from (mostly) German taxpayers. Others are more dour and fear the rise of more malignant forms of dictatorship.

Here’s a blurb from the U.K.-based Daily Mail:

Democracy could ‘collapse’ in Greece, Spain and Portugal unless urgent action is taken to tackle the debt crisis, the head of the European Commission has warned. In an extraordinary briefing to trade union chiefs last week, Commission President Jose Manuel Barroso set out an ‘apocalyptic’ vision in which crisis-hit countries in southern Europe could fall victim to military coups or popular uprisings as interest rates soar and public services collapse because their governments run out of money. The stark warning came as it emerged that EU chiefs have begun work on an emergency bailout package for Spain which is likely to run into hundreds of billions of pounds. …Leaders are expected to thrash out a rescue package for Spain’s teetering economy. Spain is expected to ask for an initial guarantee of at least £100 billion, although this figure could rise sharply if the crisis deepens. News of the behind-the-scenes scramble in Brussels spells bad news for the British economy as many of our major banks have loaned Spain vast sums of money in recent years. Germany’s authoritative Frankfurter Allgemeine Newspaper reported that Spain is poised to ask for multi-billion pound credits. Mr Barroso and Jean-Claude Trichet of the European Central Bank are united on the need for a rescue plan. The looming bankruptcy of Spain, one of the foremost economies in Europe, poses far more of a threat to European unity and the euro project than Greece. Greece contributes 2.5 percent of GDP to Europe, Spain nearly 12 percent.

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Much of Europe is dealing with a fiscal crisis caused by too much spending and economic stagnation caused by excessive taxation. But for the bureaucratic elite in Brussels, the important business of wasting other people’s money never goes on holiday. So it is quite appropriate that the latest hare-brained scheme from the continent is subsidized vacations. This is not a joke. Or, if it is, many newspapers have fallen for the story. The UK-based Times reports on this vital new addition to the list of human rights financed by other people’s money:

An overseas holiday used to be thought of as a reward for a year’s hard work. Now Brussels has declared that tourism is a human right and pensioners, youths and those too poor to afford it should have their travel subsidised by the taxpayer. Under the scheme, British pensioners could be given cut-price trips to Spain, while Greek teenagers could be taken around disused mills in Manchester to experience the cultural diversity of Europe. The idea for the subsidised tours is the brainchild of Antonio Tajani, the European Union commissioner for enterprise and industry, who was appointed by Silvio Berlusconi, the Italian prime minister. The scheme, which could cost hundreds of millions of pounds a year, is intended to promote a sense of pride in European culture, bridge the north-south divide in the continent and prop up resorts in their off-season. …The European Union has experience of subsidised holidays. In February the European parliament paid contributions of up to 52% towards an eight-day skiing trip in the Italian Alps for 80 children of Eurocrats. Tajani’s programme will be piloted until 2013 and then put into full operation. It will be open to pensioners and anyone over 65, young people between 18 and 25, families facing “difficult social, financial or personal” circumstances and disabled people.

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Tax-news.com reports that the French and Italian governments want Europe to impose a tax on imports from nations that don’t adopt misguided climate-change/global-warming rules. This is awful policy, but the good news is that such a policy presumably won’t happen unless all 27 European Union nations agree:

France and Italy have demanded that the European Union (EU) consider the introduction of a carbon tax on imports from outside the EU, where countries do not comply with EU standards on environmental issues. In a joint letter to Jose Manuel Barroso, the head of the European Commission, President Sarkozy of France and Prime Minister Silvio Berlusconi of Italy stressed that: “It would be unacceptable if the ambitious efforts already agreed by the EU to reduce greenhouse gas emissions… were compromised by carbon leaking due to… insufficient action by certain third countries.” The letter went on to say that the tax could be used to pressurize third world countries to adopt measures to reduce their carbon emissions. …The irony is that the French government recently abandoned a plan to introduce a carbon tax in the country following a ruling that it was unconstitutional. The French government’s view is that any new carbon tax would only be viable if it was adopted by all 27 EU member states.

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Greece is in trouble for a combination of reasons. Government spending is far too excessive, diverting resources from more efficient uses. The bureaucracy is too large and paid too much, resulting in a misallocation of labor. And tax rates are too high, further hindering the productive sector of the economy. Europe’s political class wants to bail out Greece’s profligate government. The official reason for a bailout, to protect the euro currency, makes no sense. After all, if Illinois or California default, that would not affect the strength (or lack thereof) of the dollar.

To understand what is really happening in Europe, it is always wise to look at what politicians are doing and ignore what they are saying. Political union is the religion of Europe’s political class, and they relentlessly use any excuse to centralize power in Brussels and strip away national sovereignty. Greece’s fiscal crisis is simply the latest excuse to move the goalposts. The Daily Telegraph reports that Germany and France are now conspiring to create an “economic government” for the European Union. Supposedly this entity would only have supervisory powers, but it is a virtual certainty that a European-wide tax will be the next step for the euro-centralizers.

Germany and France have [proposed] controversial plans to create an “economic government of the European Union” to police financial policy across the continent. They have put Herman Van Rompuy, the EU President, in charge of a special task force to examine “all options possible” to prevent another crisis like the one caused by the Greek meltdown. …The options he will consider include the creation of an “economic government” by the by the end of the year. “We commit to promote a strong co-ordination of economic policies in Europe,” said a draft text expected to be agreed by EU leaders last night. “We consider that the European Council should become the economic government of the EU and we propose to increase its role in economic surveillance and the definition of the EU’s growth strategy.” …Mr Van Rompuy, the former Prime Minister of Belgium, is an enthusiastic supporter of “la gouvernement économique” and last month upset many national capitals by trying impose “top down” economic targets. Angela Merkel, the German Chancellor, has called for the Lisbon Treaty to be amended in order to prevent any repetition of the current Greek crisis, which has threatened to tear apart the euro.

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Greece’s fiscal disarray is a visible manifestation of Europe’s future, but the most appropriate symbol of what’s wrong with the continent comes from Brussels, where there are three “presidents” fighting over the right to represent Europe at international gatherings. The contestants include the President of the European Commission, the President of the European Council, and the European Union President (which rotates every six months among different national leaders). While these three personalities fight over who gets to sit where and shake hands first, the real problem is that they all agree that government should be bigger, taxes should be higher, and power should be more centralized as part of the effort to create a superstate in Brussels. Inside this gilded cage, insulated from actual voters, Europe’s technocratic elite is content to enjoy a parasitical existence while the welfare states of member nations slowly but surely collapse and lead to social chaos. Here’s an excerpt from the UK-based Express about the fight between the the philosophical descendants of Louis XVI (or would Nero be a better analogy?):

Promises by EU leaders that the Lisbon Treaty would herald a new era of clarity have been shattered after attempts to settle a major internal power feud resulted in a typical Brussels fudge. Bureaucrats have decided to send not just one president and his entourage to global summits but a tax-draining three. Only four months after the fanfare of Herman Van Rompuy’s appointment as European Council president, his most jealous and powerful rival in Brussels has persuaded allies to allow him to muscle in too. José Manuel Barroso, president of the European Commission, has succeeded in his demands that he should also go to diplomatic summits, such as the G20, after insisting only he has the expertise to deal with specific policy matters. At certain summits there will even be a third representative – the leader of the country holding the EU’s rotating presidency. This seems to justify criticism that the Lisbon Treaty would add to the EU’s murky waters and not be a move towards transparency. …Since the Lisbon Treaty came into force at the end of last year, arguments have raged in Brussels over which department does what. Mr Van Rompuy, the former Belgian prime minister dismissed last month by Ukip MEP Nigel Farage as a “damp rag” and a “low-grade bank clerk”, is the permanent president of the European Council.

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Insanity is sometimes defined as doing the same thing over and over again while expecting a different result. On this basis the Euro-statists are clinically over the edge. They keep centralizing more power in Brussels and then they complain that European economies remain stagnant. On this basis, the new EU President must have escaped from the sanitarium, because he is asking for “economic government.” This means, not surprisingly, more power for Brussels to harmonize and regulate in hopes of creating the imaginary nirvana of a competitive social model. But I have to admire the perseverance of the “federalists,” as they are known. Every time they expand power, such as the recent Lisbon Treaty (basically a sanitized version of the statist EU constitution), they claim that they don’t intend to push for more centralization. Yet the ink is barely dry on one agreement before they start pushing for more powers. You would think European citizens would wake up to this boy-who-cried-wolf scam, but since the “European project” is fundamentally anti-democratic, most of them have ceased paying attention.

The European Union’s new president, Herman Van Rompuy, is calling for an “economic government” for the bloc, with closer policy coordination and financial incentives for good performers. …”Whether it is called coordination of policies or economic government,” only the European nations working are “capable of delivering and sustaining a common European strategy for more growth and more jobs,” he underlined. …The evocation of a European “economic government” will please France which has lobbied in this direction for years without success. …Thursday’s summit will also will also prepare the ground for a new EU economic strategy, focussing on investing in research, innovation and the green economy. This will replace the bloc’s Lisbon Strategy launched in 2000. The ambitious Lisbon Strategy was supposed to make Europe’s economy the most competitive and dynamic in the world. It failed to do so and Van Rompuy was happy to bury it. …For Van Rompuy it the matter is urgent and strikes at the very heart of the European project. …”Our structural growth rate is not high enough to create jobs and sustain our social model,” he warned.

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It seems that the European Union’s governing entities, the European Commission and the semi-ceremonial European Parliament, combine the worst features of statism and collectivism from the entire continent. The Euro-crats make lots of noises about subsidiarity and other policies to leave decision making in the hands of national and local governments, but virtually every policy coming from Brussels is a new power grab for unelected and unaccountable bureaucrats. The latest example is possible EU-wide driving laws for the purposes of imposing absurdly low speed limits and to requiring foolish rules against more comfortable and safer large cars. Here’s what the UK-based Express wrote about the topic:

Brussels bureaucrats want to slap draconian European Union driving laws on Britain’s roads in a new “green” campaign on motorists, it emerged last night. Measures being considered include a barrage of new maximum speed limits in town and city areas. British motorists could also be forced to undertake exams in “environmentally-friendly” road skills as part of an EU-wide overhaul of driving tests. And many large cars and other so-called gas-guzzling vehicles face being banned from newly-declared “green zones” in urban centres. The latest threat of meddling from Brussels comes in an Action Plan on Urban Mobility drawn up by European Commission transport chiefs. …Mats Persson, of the Euro-sceptic think tank Open Europe, commented: “This illustrates that the EU simply can’t stop interfering in every aspect of people’s lives.”

Meanwhile, a different tentacle of the European octopus is proposing that the European Union be given the power to audit budget numbers from member nations. Given the fiscal fiasco in Greece, this seems like it might be a reasonable step – until one remembers that the EU’s auditors every year give a failing grade to the EU’s own budget practices. The EU Observer reports on the issue, but the phrase “blind leading the blind” somehow did not get included:

…the European Commission has indicated it will seek audit powers for the EU’s statistics office, Eurostat, in order to verify elements of national government accounts. …Speaking to journalists after a meeting of EU finance ministers on Tuesday (19 January), outgoing EU economy commissioner Joaquin Almunia said greater Eurostat auditing powers could have avoided the mistakes that led to the Greek revision. He said the commission will propose “a new regulation in order to obtain powers, which we’ve already requested, to give Eurostat the possibility of carrying out audits.”

Last but not least, that same EU Observer story has a tiny bit of good news, or at least a dark cloud with a silver lining. Some of Europe’s governments want to impose an EU-wide tax on banks. This certainly fits the theme of ever-growing levels of bureaucracy and interference from Brussels, but the good news is that there is still (even under the statist Lisbon Treaty) a national veto on tax matters. So even though some of the big nations in Europe want to demagogue against the financial sector, the EU’s taxation commissioner (and former communist from Hungary) sadly indicated that such a tax probably would not make it through the process:

While discussion on Greece took up considerable time, EU finance ministers did have an opportunity to discuss a Swedish proposal for an EU-wide bank levy to mitigate the effects of future financial crises. …British, Belgian and German ministers were amongst those who showed moderate support for the idea. However, outgoing EU taxation commissioner Laszlo Kovacs said it was unlikely to fly because of EU unanimity voting in the area of taxation.

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I don’t really know much about the UKIP Party from the U.K. They are anti-centralization, which is something to admire, but I vaguely recall that a few of their members were caught up in an expenses scandal. In any event, their leader has a great speech about the anti-democratic nature of the European Union.

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