If we believe the EU can protect itself from Germany, how do we interpret the Merkel and Sarkozy alliance to manage the euro? Is it legitimate that we give them the keys to power? For now, they have made it clear that that is up to France and Germany to decide. And their proposals indicate that they have always ruled the EU.
With respect to the tax on financial transactions, it will penalize growth and provoke some companies to move elsewhere or sidestep regulations. It will suck up liquidity just when it is needed most and it will not slow down speculation. On the bright side, it could improve supervision and control within the financial industry and achieve a consistent corporate tax rate. Competition positively impact taxation. If that is eliminated, then we?ll be competing with the United States with just one arm and, at ultimately, we would place a major tax burden on our companies.
Although it would help to simplify tax rates, guess who this would favor? Germany and France, where there are many more corporate headquarters. And what will happen with the I+D deductions on exports? It will be very difficult to coordinate.
With regard to debt limits, it is essential, but it shouldn?t be forgotten that it is mandatory for peripheral countries to go through the crisis at the same time that they cut back spending. Everyone has obligation to make adjustments toward sustainability, but those with greater fiscal flexibility, such as Germany, are responsible for avoiding stagnation. In their own way, Merkel and Sarkozy are showing the way without having first demonstrated leadership. One only has to look at how they want to put Van Rompuy up front even though he rarely if ever raises his voice.
