Something happened in the European Union before the Easter break, over and above the agreement in principle on the Financial Perspectives which I have already commented upon in this column (see issue 9170). My first observation concerns the ripples spotted at last in the waters of the big debate on the relaunch of the constitution and the EU's borders. I will return later to the position taken by the European People's Party (EPP), Jacques Delors' speech to the Socialist Group at the European Parliament, and the possible repercussions of the outcome of the elections in Italy and other news I believe to be important.
Diverging interests. First of all, I would like to highlight the significance of the Vienna ECOFIN Council (of Economic and Finance ministers) where EU ministers discussed vital issues and took by the horns controversial questions like tax harmonisation and bouts of economic nationalism. Debate was frank and open not only in the relative secrecy of closed door meetings but also in statements to journalists. Our bulletin (issue 9171) devotes several pages to explaining the issues. Differences of opinion on company taxation came as little surprise. It is well known that some governments see tax competition between Member States as par for the course, while others see it as incompatible with the idea of a common market where only competition between companies should be allowed. The European Commission's recommended compromise aims to reach harmonisation on what should be taxed rather than the rate of taxation itself. Those opposed to tax harmonisation argue that a uniform tax basis would in reality be a first step in the direction of harmonisation of tax rates, while supporters of the idea of a uniform tax basis argue that cutting red tape and the resulting cost savings would be a boon to companies active in more than one Member State.
The ministers were eloquent in the defence of their positions, making great speeches about the danger of losing sovereignty in an area where decisions are taken at national level, or taking the opposite tack and talking of openness and the proper functioning of the common market. This is not really a question of doctrine but of national interests that currently diverge. Some Member States have the policy of using taxation to attract investment, while others see the most important issue at stake as the stability of tax income and the maintaining of the national economy. In addition, there are further complications like state aid and EU Structural Fund payments to companies which relocate. Among European Commissioners themselves, views are often far from uniform. Taxation Commissioner Laszlo Kovacs favours tax harmonisation, but Internal Market Commissioner Charlie McCreevy makes no attempt to hide his reservations.
Moving towards 'strengthened cooperation'? We should not kid ourselves - we won't have a uniform European tax system in the near future (although we can hope that all Member States will gradually come to realise that the real danger is not of relocation within the EU but of relocation elsewhere). For the moment, we will have to make do with the 'rules of the game' on state aid and EU Structural Funds, under the European Commission's watchful eye. But another question has arisen in the harmonisation dossier - Member States were asked by the Commission to explore the hypothesis of 'strengthened cooperation'. In my view, this is a brave new step on the political scene because the Commission asked governments to give their views on the 'technical feasibility' of harmonisation among the Member States that so desire through 'strengthened cooperation'. This idea was outlined in the preparatory document ahead of the Vienna meeting in the event that unanimous agreement has still not been reached on a uniform taxation basis by the end of the year (see issue 9168 of our bulletin). The Commission has now asked governments to state their views. Initial indications suggest that the founding Member States (apart from the Netherlands) and a few others are in favour, but others have refused to take a firm line, preferring to discuss technical aspects instead. Under current legislation, 'strengthened cooperation' is possible if at least a third of Member States (nine of them when Romania and Bulgaria join) take part. The political significance of a straw poll on this controversial issue is clear when one considers the backdrop of the current big debate on the institutional and constitutional future of the European Union.
Tomorrow, I will comment on the other fundamental issue of discussion at the Vienna meeting, namely national protectionism. (F. R.)