European Comparisons

2009/2010 has been a period of phoney fiscalism in the United Kingdom. The period is sandwiched between the economic crisis, which put fiscal policy onto an emergency, macro-economic footing and an election (May 6th 2010). Economic crisis has been marked in the UK as in most other countries by a severe worsening of the fiscal balance which has been supported for now by government borrowing and straightforward money-creation (“quantitative easing”). The political constraint of election has led to a more than usually cosmetic approach to changes in the structure of taxation.

The French Minister of Economy, Christine Lagarde, recently announced that the government will stimulate the housing market in an attempt to boost the economy. “Building and construction industry is a key sector, with important multiplier effect on the whole economy”, says Lagarde, “Our aim is to improve access to private property, knowing that only 58% of French citizens own their home, while the EU average is at 66%.”

It is summertime and everyone is happy to take a brake from what has been a terribly tormented spring. Many of our European politicians and policy advisers (IMF) feel satisfied—or at least claim to be—that they have done the right thing and kept the boat afloat. Now, they say, we just have to consolidate the job to make sure that a new big financial crisis, spurred by disastrous public finance in many EU countries, will not blow in our faces.

Question: Mr. President announces that, starting in 2011, there will be a sharp increase in tax rates. What do you think individuals and businesses will do in 2010? Using basic economics, Arthur Laffer in a Wall Street Journal article dated June 6 gives us a very plausible scenario: Individuals and businesses will do their best to transform the wealth and income to be taxed in 2011 into wealth and income to be taxed in 2010.

This is the payroll tax paid on wages in Greece. 28% of it is born by employers and 16% by employees. It is not surprising that the unemployment rate in…

As a long-standing critic of the concept of a single European currency, I have not rejoiced at the current problems in the eurozone that threaten the very survival of the euro. Before discussing the events surrounding the Greek debt crisis further, I must provide at least a working definition of what the word “collapse” means. In the context of the euro, there are at least two interpretations that come to mind. The first one suggests that the eurozone project or the project establishing a common European currency has collapsed already by failing to bring about positive effects that had been expected of it.

According to Eurostat, the public expenditure in Romania in 2009 was 40.4% of the Gross Domestic Product. This means nothing else but the fact that 40.4% of the wealth was spent by someone else, not by the people who actually produced it. On average, they could dispose only 59.6% of the results generated by their efforts. This implies that romanians worked 147 days for the state. Consequently, 28th of May is the Tax Freedom Day for the Romanian taxpayers.

This is a statement of the former minister of finances Thierry Breton. According to him, in 2013 France will exceed the amount of bonds emitted by Germany. The debt in the euro zone will become therefore mostly “latin”, with France, Italy, Spain and Portugal becoming the main debtor nations. They have, adds Thierry Breton, built their national (cheap) debt on the solidity of the German bonds but this era is coming to an end. Nowadays, the totality of the income tax revenues in France is going to the payment of the interest of the public debt.

IREF is presenting for the third consecutive year a unique report on taxation in Europe. You can find here expert analysis of the fiscal policy in 22 european countries, the most recent data and forecast for future developments. Summary by Professor Pierre Garello.

The disaster everyone feared for several months finally occurred yesterday – Greece’s credit rating was reduced to junk status and financial markets slumped. Moreover, Portugal’s debt has also been downgraded, Spanish stocks plunged more than four percentage points and in Italy it was difficult to sell government bonds.