Since the fallout of the 2008 financial crisis turned into the debt crisis in the eurozone around 2010, the eurozone itself, as a viable economic area, has come under close scrutiny. One major criticism has been that for a monetary or economic union to precede a political union is an impossible situation. Taxpayers from the north of Europe – principally Germany – have bemoaned the use of their own state’s money being used to bail out southern debtor nations, while the latter have decried the disproportionate power that northern states wield.
Wide angle
One solution to this has been to propose a Europe-wide tax, essentially meaning closer economic integration, but also further political union. According to the German publication Der Spiegel: “In Brussels and Berlin alike, financial experts are devising plans to provide the euro group with the same tool that has proven to be so successful throughout history: its own tax.”
The ability to raise tax is deeply tied to the development of a nation-state, and modern conceptions of citizenship
European Commission President Jean-Claude Juncker has said that he would be open to a common eurozone treasury one day, while German Finance Minister Wolfgang Schäuble is said to be in favour of European nations having tax revenue transferred to a separate budget for the monetary union. French President François Hollande has also said that the union should have a separate finance minister with the power to intervene in national budgets as well his or her own. A union-wide budget could be used as a tool to offset economic discrepancies.
It seems that many in Europe are now looking towards increasing the fiscal powers – in terms of both raising and spending revenue – of the eurozone. While tax and fiscal matters are generally part of economic policy, they have deeply political connotations. The American Revolution was sparked by the political connotations of tax – ‘no taxation without representation’. The ability to raise tax is deeply tied to the development of a nation-state and modern conceptions of citizenship. When modern nation-states emerged, the ability of the bureaucracy to raise revenues for governments was a key component, while paying tax to central government was part of the creation of the modern citizen and their identification as a member of a nation-state.
Divided loyalties
There is, then, the argument that the creation of fiscal powers for the eurozone will help address one of its most fundamental problems: most Europeans still place their loyalties primarily at the national level, seeing themselves first as Greek, French, German or Italian. However, at the same time, it seems questionable that fiscal matters alone could engender enough passion to result in the forging of new identities. The uniting of the US states relied upon more than just common fiscal policy. Europeans could just as easily resent the imposition of new taxes to Brussels, just as some European states in the north resent their current fiscal transfers south.
However, a Europe-wide tax could reduce some of the resent currently fracturing the eurozone, particularly from weaker and poorer nations. Although Germany provides large transfers of funds to much of the rest of the EU, there is a sense that this gives it undue power. By pooling tax to an external, pan-European body, Germany’s power in the EU could be curtailed. Although, as with many EU matters, the position is, unfortunately, unlikely to be subjected to a popular vote. This essentially means Europeans could see parts of their income taken and spent by someone they have had no say in appointing and have no way of recalling – further adding fuel to the fire of resentment.