Friday 2 December 2011

Fiscal Union

Frau Merkel has again been on the airwaves today claiming fiscal Union for the Eurozone is now on the agenda. Well, I wish the wedding well.

Many of us have taken on a fiscal union and few have found that it works quite how you think it will at the start. Often there are two jobs for a starters, then this declines to one, then there are the kids to look after and in no time at all one party to the Union is paying for 5 mouths to feed on a single income - happiness and bliss emotionally but financially crippling. This is before anyone gets sick...

However, the same is likely to apply to the European Union. At the moment, with the world teetering on the edge of a depression of unknown proportions, any idea which solves the Sovereign Debt Crisis is a good one. Perhaps the Germans are finally coming to terms with the gravity of the situation now that it is rumoured that it is allegedly Deutsche Bank who came close to failing on Monday. The populacee may now be bounced into this marriage - but like all Fiscal Unions, the happiness of the big day can drift.

Will the Fiscal Union make it to the 7 year itch?

17 comments:

Mark Wadsworth said...

They'll be lucky to make the seven month itch.

The topic of marriage as a fiscal union is an interesting one. Seeing as most couple share income and expenses 50/50-ish, this halves the amount of net income which either party can earn.

So with an average marginal overall tax rate of 52% in the UK (once you take benefits withdrawal and VAT into account), yer single person keeps 48p for every £ earned.

If he or she shares that 48p with their other half, he or she only keeps 24p in the £.

CityUnslicker said...

MW interesting - I doubt whether I spend 10% of my income - then again I have wife, 3 kids, even the dog gets well fed etc.

Can you tell I have a hangover today?

Budgie said...

I doubt that the reality of fiscal union will occur quickly enough to actually solve the eurozone problems. Maybe the promise of one will hold off the markets, together with a genuine EFSF E2 trillion, or Fed bailouts, for long enough for the treaty changes and internal politics to make it happen.

Fiscal union means the German taxpayer will subsidise the PIIGS for as far in to the future as I can see. To function properly it will mean complete political union with PIIGS workers migrating to Germany by the millions.

This raises the question 'what will the UK do?'. If the raving euro-looney Cameron has his way he will shrink from us being "isolated", and our subjugation and humiliation will be complete. From world empire to non-existence in a 100 years.

Mark Wadsworth said...

CU, ten per cent looks about right.

The money I spend purely on my own selfish stuff (coffees, lunch, booze, fags, car running costs and the occasional CD, book or electronic gizmo) is about a tenth of my headline income pre-tax. I have one wife, two kids, no dog and you'd be surprised at how cheap fish food is :-)

Demetrius said...

I thnk the honeymoon for this fiscal union will be less than fun.

Anonymous said...

Merkel has been quiet of late probalby due to Germany realising its as much in the shit as everybody else and her credibility washing out to sea. I think she is only blethering about "fiscal union" now because Draghi has proposed a solution similar to one that I was mentioning a few days ago - putting the fiscal demands of the ECB as a constitutional requirement of each nation guaranteed by the national bank. What this would mean in effect would be that the national bank would collect taxes and give the money to the government but the government would not be able to spend any more than what they were given by the national bank. This was how the Bundesbank worked for decades. No need for some hugely complicate and contraversial US of Europe nonsense that would take 10 years to get off the ground, if it ever did. Just a few changes to the constitution of each nation that could be handled pragmatically in each country within a matter of months. Once in place the ECB would be free to write off the debt of dodgy Latin countries with freshly printed Euros knowing that history won't be able to repeat.

Merkel doesn't want that of course. She sees the EZ crisis as a means of making a clumsy power grab to create a USofEurope. As long as she persists in this nonsense then the EU is doomed.

Budgie said...

Anon 3:42pm said: "Just a few changes to the constitution of each nation ... within a matter of months."

That timetable is optimistic and, anyway, the eurozone does not have "months".

Cash Advances said...

It'll be interesting to see the outcome Demetrius.

Anonymous said...

Merkel is laying chaf to divert attention from the planned exit of Greece, after the banks shut for Xmas. NuDrachma on 1st Jan 2012 I'd wager.

hovis said...

Anon 5.04: Even if that's the case,(it's in Greece's interest imho), contagion has gone too far for that to stop the rot, if Greece, when Italy Portugal and Spain?

measured said...

It is a shotgun marriage, whatever Merkel may say. She is after all the reluctant bridegroom. w

Sarkozy will know by now how bust the French banks are. Disastrously busted.

He has to agree to whatever Germany wants. He isn't the one wearing the trousers in this marriage. That is for sure.

Mr Ecks said...

Still don't see how fiscal union helps em (apart from the short term market/morale angle). Germnanny is still going to have to carry all the rest, inc France in the same way the SE subs the rest of the UK. We drifted into that situation ( and remember the anger about the subsidised Scots/Welsh)but it will be obv to the Germans they are working to support the rest.How does it help the EU idiots more than marginally?

Mark Wadsworth said...

Anon said:

"the national bank would collect taxes and give the money to the government but the government would not be able to spend any more than what they were given by the national bank. This was how the Bundesbank worked for decades."

This might be a very good way of running things, but to say that this is what the Bundesbank did is completely untrue. The Bundesbank was just a particularly hawkish and apolitical central bank.

The fear of inflation is deeply engrained in German national consciousness, it is a pillar of their national religion, along with having an export surplus and a 'strong' currency (whatever that means).

dearieme said...

My father on marriage: "Suddenly your penny bun costs fivepence".

Electro-Kevin said...

Fiscal Union needs a Treaty which needs a referendum.

If you don't agree with this then you need to be taken outside and shot in front of your families.

Only, unlike Jeremy Clarkson, I'm fucking serious.

Laban said...

It's a bit of a shotgun wedding, isn't it? The groom is a hard-working, serious chap with a decent income and a nice house that he's lived frugally to pay for.

The bride already has 16 children, four of whom are high-spending teenagers with considerable credit card debts.

Budgie said...

EK said: "Fiscal Union needs a Treaty which needs a referendum."

No, it doesn't. See Lisbon, Treaty of.