Here\’s a question: love to know the answer.
OK, so, the euro, it can only really continue with full and proper economic and fiscal union.
The necessarily leads to fiscal transfers: just as within the UK or within the US. The rich regions (London, SE) have to cough up to pay for the poor (Wales, Tyneside).
It will be the rich, Northern, European countries that have to cough up for the poor.
Now, note, I\’m not talking about sorting out the current debt. I\’m talking about decades, generations, long transfers of year by year money. As within the UK or US (and do note that over generations the direction of flow can change. The UK\’s North arguably subsidised the SW in the 19th cent, Michigan is arguably being subsidised now when in the 1950s and 60s it was doing the subsidising).
But the thing I\’d like to know is, how large do those transfers have to be? 0.5% of GDP would hardly be noticed in the rich countries: that\’s less than the current EU budget which, while we complain about it, isn\’t in the grand scheme of things much more than a rounding error (no, I don\’t regard the net payment into the EU as the UK\’s major problem with the EU….I\’m much more worried about the net transfer of the bureaucratic and Napoleonic Law system of the continent to the UK).
But 0.5% of GDP is indeed less than the current EU budget and so won\’t be enough to gives us fiscal union, the amount of redistribution necessary for it, for the obvious reason that we\’re already spending that and haven\’t got the necessary amount of redistribution to make fiscal union work.
So how much is needed?
5% of GDP? 10%? How much is redistributed from London and the SE to Wales and Tyneside? That would be the absolute minimum I would think: the difference between Greece and Sweden is higher than that within UK difference isn\’t it?
And, given that in N Europe the State already takes 40-50% of GDP, do we really think there is room to plonk another 10% (or whatever the number is) on top?
Alternatively, which parts of the current State in N Europe will have to be sacrificed in order to pay for the transfers to the poorer parts of Europe?
So, to the main question: does anyone know what levels of fiscal transfer will be needed in order to make fiscal union work?