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Democrat June 2000 (Number 44)

How the EU Operates

Tax Harmonisation

Target of taxation and effect!

The latest attack on the rights of EU states to decide their own economic policy was endorsed by the Commission on May 24 2000.

The commission report on public finances sets out guidelines for an EU-wide economic policy, including for member states not in the struggling single currency.

This involves further demands for budget deficit cuts and mass privatisation to be the overriding priority for national governments.

High-debt member states, like Belguim and Italy, have been particularly singled out and told to slash public spending to keep on track with existing EU goals.

The Commission also told Rome not to delay planned pension cuts and introduce private pensions by 2001. "In the absence of corrective measures, ageing populations could put strong pressure on the budget deficit," said the Commission in the report.

"The required changes, which should include further steps to promote funded pensions provision, would allow a broader overhaul of the Italian welfare system," it added.

Low government deficits, public borrowing and inflation were all stipulations in the Treaty on European Union (Maastricht). Brussels has long demanded that all member states stick to these criteria which has led to the introduction in Britain of PFI to fund the welfare and education services ie hand it all over to the private sector.

Economic Affairs commissioner Pedro Solbes also ordered all 15 treasuries to only consider tax cuts where they are matched by public spending cuts "to get the balance right between further tax reforms and deficit reductions." Otherwise known as tax harmonisation by stealth.

The commission demanded the latest criteria must be applied when capital's assessing national budget plans for 2001.

Predictably, the Treasury in London denied any suggestions that Brussels was delivering economic policy lectures and setting down binding rules. "The fact that we have agreed with the criteria that they will use does not mean that we have subcontracted the budget to Europe," it said. However, the treasury declined to answer what happens when such opinions diverge.