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The Absence of a Common Fiscal Policy in Europe

  • Date Submitted: 03/16/2010 08:40 PM
  • Flesch-Kincaid Score: 18.7 
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THE ABSENCE OF A COMMON FISCAL POLICY IN THE EUROPEAN UNION
I would like to illustrate you how the absence of a central fiscal system   affects the economic activity in the Euro zone and how the pooling of some fiscal instruments over which national governments have no or little control is an optimum strategy against economic and fiscal shock:
Let me give you first an essential background information about the fiscal policy: according to the fiscal policy the balance between the use of government spending and taxation revenue has an impact on the economic activity of a country; How? For example if there is an increase in government spending and a fall in taxation revenue a budget deficit is registered   leading as well to a higher percentage of global debt with the consequence of creating instability over the all economic growth of the country.
Now in the European Union each Member State follow the fiscal policy of its national government, but at the same time each one of them have to respect the provisions of the stability growth pact in maintaining the budget balance and this leads to conflicts among the States, because how will each country maintain the same budget balances if there is no fiscal consolidation among them?
Some countries will register a high budget deficit and public debt whether others will have low public debt and budget surplus according to their economic capacity and structure and according to their taxation system which is also meeting their national requirements.
Now let’s see this situation of imbalance between the EU members through an example: Greece, as Jelena illustrate you before has exceeded the Eu ceiling every year since the country adopted Euro, registering the highest percentage of budget deficit and public debt due to internal economic problems of an inefficient tax system where tax evasion is widespread feeding the Greek attitude that only the stupid pay taxes. So that   in Greece tax revenue is among the lowest in the...

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