Against social and tax dumping. Guy Verhofstadt has no quarrel with the view that the national authorities (governments and parliaments) and the social partners of the Member States should be increasing involved in getting the Lisbon Strategy on its feet, but he stresses that this should not be allowed to eclipse the European nature of the strategy. Without the commitment of the authorities and of the economic and social forces, the strategy is most certainly on a hiding to nothing. But in the absence of European coherence and joint steering, purely national actions may undermine Community cohesion. His memorandum (see our bulletins of last week) states that “by prioritising the national approach over the Community approach, we are running the risk that the specific nature of the European model of society could be swallowed up in a competition between national actions”. In particular, he spoke out against the dangers of tax and social dumping. This danger, as our regular readers know, has already led to impassioned debates in the Union on tax on company profits and the draft directive on services (Bolkestein directive). Guy Verhofstadt talks about this in a general and global way: “we cannot allow ourselves to cause social or tax dumping inside or outside the Union's borders. Doing nothing or starting a mad race between the Member States to put social protection costs or public infrastructure under pressure are both unacceptable options, because in either case we would risk losing the European social model”.
The code of convergence. The first of the five actions proposed to face up to these challenges is to give the EU a “code of convergence”, the objective of which would be to “define a kind of band-width inside which the economies of the Member States must develop in order to create a more integrated and competitive European economy together. The maxima (ceilings) correspond to values which would undermine the economy if exceeded; the minima (floors) express the values to be achieved to guarantee social protection and the sustainable nature of development”. What elements would the code be applied to? The Prime Minister refers to the duration of professional careers, the flexibility of the employment market, the State's stake in the economy and the tax burden on business. The last example is the simplest: instead of leaving each State entirely free, as is the case today, to set its own level of tax on company profits, a bracket would be established, within which each government would set its national rate. This elasticity would help “the specific nature of each national economy to be taken on board”, plus its traditions, the mindset of its people. Convergence is not harmonisation and still less uniformisation, but the gap between the minima and the maxima should not be too great. In the euro zone, the “code of convergence” would be an essential addition to the obligations of the Stability Pact.
Parallel instruments. The second instrument in the sequence is the balance between direct and indirect taxation, which I discussed in this column yesterday. Initially, indirect taxes (which do not increase production costs) should rise to 40% of the overall tax burden (it is currently around 33% on average, with considerable differences from one Member State to the next), to stabilise around 50%. Thus, the funding of the European model of society would no longer rely on production, but half of the burden would be transferred to consumption, including that of imports.
The third instrument is the completion of the internal market, with the automatic entry into force of European directives, should their transposition into national legislation be unduly delayed. The fourth is represented by the dramatic increase in the research effort; the EU must spent half of the credits earmarked for competitiveness under the Union's financial perspectives on research, and each Member State must spend a quarter of the Community structural funds it receives on research and innovation. The last instrument is the European “political steering” of the whole of the strategy. The European Commission would be in charge of overseeing the application of the “code of convergence” and the compliance of all national measures with the Lisbon Strategy. National surveillance should also be stepped up: as well as appointed a minister to oversee the implementation of the strategy in each Member State, as has already been proposed, there should be an ad hoc parliamentary committee in each Member State made up of members of the national and of the European parliaments.
No miracle cures. Mr Verhofstadt doesn't believe in miracles: he won't get his project approved at the forthcoming Spring Summit. His objective, at this stage, is to open up a reflection on a few new ideas.
(F.R.)