Fiscal Training-Wheels for the E.U.

The government of the E.U. state of Greece announced on September 11, 2011 that its cabinet had decided to impose a new property tax to cover a 2 billion euro ($2.7 billion) projected revenue shortfall for the year. The government expected the state to meet its deficit goals of 17.1 billion euros (8.2% of GDP) in 2011 and 14.9 billion in 2012.[1] Earlier in September, talks between the state government and the E.U. Commission, the European Central Bank, and the International Monetary Fund had broken down in a dispute over whether Greece had done enough to meet its deficit targets. Pressure to assuage the “troika” amid popular protests in Greece apparently trumped questions on the legitimacy of a tax increase enacted by a cabinet without the approval of the state legislature.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.


1. Granitsas Alkman, “Greece Announces New Tax as Unrest Flares,” The Wall Street Journal, September 12, 2011; David Gauthier-Villars and Nathalie Boschat, “Woes at French Banks Signal a Broader Crisis,” The Wall Street Journal, September 12, 2011; Ainsley Thomson and Marcus Walker, “Support Grows for New EU Treaty to Boost Fiscal Ties in Euro Zone,” The Wall Street Journal, September 12, 2011.

On the Perils of E.U. States Being In Charge

Wolfgang Schäuble, the finance minister of the state of Germany, does not mince words when it comes to the state of Greece sticking to its promise to reduce its deficit in order to receive aid from the E.U. through its Financial Stability Facility. Aid will be paid, he said on September 8, 2011 in a radio interview, “if Greece actually does what it agreed to do.”[1] If monitors do not sign off on Greece having fulfilled its promises, then “Greece has to see how it gets access to financial markets without help from [the E.U. facility].”[2] Ouch! Meanwhile, the state government of Finland was still insisting on collateral from Greece as a condition for contributing to the aid. Adding still additional pressure on the Greek government, Mark Rutte, prime minister of the Netherlands, had said on the previous day that states receiving aid should either cede control over their budgets or drop the euro. According to the New York Times, many economists believe that the ripple effects from Greece’s departure from the euro “could be catastrophic for the world economy.”[3]

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

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 1.  Steven Erlanger, “Europe Steers Into a Zone of Uncertainty,” The New York Times, September 9, 2011; Jack Ewing, “In Europe, Greece Gets a Warning about Aid,” The New York Times, September 9, 2011.

2. Ibid.

3. Ibid.

E.U.: Ever Closer Energy

Günther Oettinger, the energy commissioner at the E.U. Commission (the E.U.’s executive branch), said at a news conference on September 7, 2011 that the E.U. needs to look “beyond its borders to ensure the security of energy supplies.”[1] Having the states “act together and speak with one voice” through their federal government is the rationale for ever closer union.[2] To be sure, ever closer union has its limits; the hominization of Europe via political consolidation would ignore the innate diversity that exists within any empire-level union of states, whether the E.U., A.U. or U.S. Even so, fear of consolidation need not hamper Europe from being able to benefit from united action.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon. 

1. James Kanter, “Brussels Seeks More Control Over Energy Deals,” The New York Times, September 8, 2011.
2. Ibid.

The German Court in the E.U.: Exasperating or Mitigating Germany's Veto in the E.U.?

Did Angela Merkel violate the property rights of residents in the state of Germany by agreeing to the initial bank bailout in the E.U.? Should she have gotten the approval of the Bundestag first? According to a German state court on September 7, 2011, “no and a qualified yes.” The court ruled that the approval of the Bundestag’s budget committee is necessary for significant increases in the European Financial Stability Facility. The question as put by The Wall Street Journal the day before the ruling can be viewed as whether parliamentary politics on the state level should be allowed to potentially slow or obstruct the E.U.’s crisis-response ability. That is, should the prerogatives of state officials be strengthened just when the E.U.’s monetary affairs require more rather than less fiscal coordination?  By requiring the approval of the budget committee in the lower house of the state legislature, the German state court ruling avoids the potentially aggravating effects of a wider circle of state legislators. Even so, other states could follow suit with respect to their committees, making it more difficult for state officials to function at the E.U. level.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Federalizing Fiscally: E.U. looks to Early U.S.

I suspect many Europeans would bristle at the suggestion that Europe could learn a thing or two from American history. If the E.U. corresponds to the U.S. and has a federal balance-of-power roughly the same as that which existed in the U.S. at, say, 1820, then the Europeans could do worse than look at American history for lessons both in what to emulate and what not to do.

The complete essay is at "Essays on Two Federal Empires."

AOL Ignores TechCrunch’s Conflict of Interest

According to The New York Times, “When Michael Arrington, the editor of the popular Web site TechCrunch, told his bosses at AOL that he was forming a venture capital company to finance some of the technology start-ups that his site wrote about, they did not fire him or ask for his resignation. Instead, . . .  they invested about $10 million in his fund.”[1] Tim Armstrong, AOL’s chief executive, issued the following statement when CrunchFund was announced: “TechCrunch is a different property and they have different standards. We have a traditional understanding of journalism with the exception of TechCrunch, which is different but is transparent about it.”[2] As for Michael Arrington, Arianna Huffington claimed that he would have no influence on coverage—that there would be, in effect, a Chinese wall between TechCrunch’s news site and venture-capital firm. However earlier on the same day, Arrington stated, “I am TechCrunch and TechCrunch is me.”[3] 

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

1. David Carr, “Tech Blogger Who Leaps Over the Line,” The New York Times, September 5, 2011, p. B1.