7.5 The Challenges of Political Integration
7.5.4 Roadmap of Principles and Priorities
Solutions to the problems confronting the EU at present should be sought in the principles contained in the landmark treaties to which the member-states have consented. From the concessions of national sovereignty that have accepted over the decades it follows that member-states aspire eventually to political unification.
Assuming that the latter takes the form of a federation, these principles dictate the design and implementation of uniform quasi-federal policies in the declining order of priority indicated in the following list:
• The enactment of the European constitution should be placed at the top of the agenda. Its approval should be pursued using procedures that will enhance the feelings of common destiny among the peoples of Europe. The same should hold true for the Hague Programme. The EU must win the confidence of smaller member-states by showing decisiveness in defending the rights of European citizens from domestic and foreign threats. Adoption of common foreign and defence policies should be gradually followed by a projection of leadership in international affairs. To achieve these objectives, EU authorities should (a) accelerate the discussions towards a common policy for defence and security, which started in 2001; (b) increase significantly defence spending; (c) proceed immediately to the integration of budgetary policies distinguishing which public goods should be provided by the centre (e.g. defence, domestic security, borders, etc.) and those to be provided by member-states (e.g. educational system, healthcare services, etc.). Recent events have shown that the independent con- duct of fiscal policies by member-states is unsustainable. Consequently, until they are integrated in some way, fiscal policies by member-states need to be coordinated more closely than in the past.28
• The common fiscal policy should be strict, so that public deficits and debts may be reduced to sustainable levels (Alesina and Giavazzi 2006, 171–2) and taxes should be harmonised because, as shown by theoretical analyses (see, e.g.
Kammas and Philippopoulos 2010), public goods that have cross-border effects can lead to competition between regions for different tax rates, thereby reducing welfare. Simultaneously, member-states should retain adequate flexibility to adopt various fiscal policy measures (e.g. for income redistribution purposes), so they can cater to local needs at a lower cost (especially through limiting rent- seeking) and with greater efficiency.
• As is now the case with monetary policy, macroeconomic policies should be decided centrally and implemented regionally within certain limits of adjust- ment. The Single European Market act cannot yield the intended results in the
28In this regard it is importance to note that, according to the Eurobarometer (2010, 11–12, 16), seven out of ten European citizens believe that the current EU crisis can be overcome only through a common economic policy, whereas eight out of ten believe that the EU must take a leading role in the regulation of international financial markets.
absence of a uniform standard on all member-states (see Alesina and Giavazzi 2006, 130–1).
• Liberalisation of all markets for goods and services, with the exception of those that should remain under the supervision and control of the pertinent EU authorities for technical reasons (e.g. network industries).
• Removal of various barriers and bureaucratic restraints that inhibit entrepreneur- ship. As argued by Karayiannis (1996), the stimulation of entrepreneurship among people with different cultures is a very dynamic process, which will enhance EU competitiveness.
• Intensification of efforts on R & D by offering stronger incentives and encour- aging closer links between business and universities.
• Integration of the court systems. To the extent possible, the application of European laws must be streamlined so that procedures and sanctions may become the same across member-states.
• Introduction of a common welfare policy designed to encourage Mediterranean countries to adopt the successful “recipes” of the Northern countries and espe- cially those of the Scandinavians.
• Adoption of comprehensive European policies regarding immigration and the environment.
• EU authorities should inform citizens about the objectives of the various eco- nomic and social policies that they introduce, as well as about the ways in which they are to be implemented, so that citizens have the opportunity to judge their impact and adapt their behaviour accordingly.
Due to the recent economic crisis in the public sector and in the budget of certain member-states, especially in Southern Europe, the taxpayers of other member- states were obliged to provide them with significant financial assistance. This development has stirred a new will on the part of member-states to cede more control over fiscal policies to a central authority in the EU. In our view, this shift of sentiment is bound to accelerate the process towards a federal Europe.
To summarise, the most significant economic benefits to the countries which entered into the EU in various phases of its enlargement emanated from such initiatives as: (a) the removal of the various barriers to competition in the markets for goods and services; (b) the elimination of state subsidies to particular sectors and businesses that undermined competition; (c) the standardisation of the charac- teristics of the various products produced and traded in the EU; (d) the opening up by member-states of their procurement processes for goods and services to compe- tition; (e) the control of state monopolies in network sectors and industries (e.g.
telephone, energy, gas, etc.) from using their monopoly power to discourage the entry of competitors into their markets and (f) the gradual harmonisation of taxation, in order to enhance healthy competition among businesses and individuals. These initiatives at economic integration promoted economic growth on the basis of competition and expanding markets. Transaction costs were significantly reduced.
Due to the expansion of knowledge and experience, economic efficiency increased and the economies of scale and scope were strengthened. Significant benefits have also started to emerge from the efforts at political unification. These, we believe, will serve as a driving force for European federalism. But to make progress in this front, European citizens need to get involved more actively by demanding more direct democracy along the lines that we will explain in Chap.8.
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Democracy in the Future and the New Welfare State