French model won’t work for Europe

Globalisation will force Europe to rethink continental political and economic integration. British Chancellor of the Exchequer Gordon Brown says Europe must move beyond the French vision of ever-closer political union, social markets, protectionism and centralisation. That vision produces stagnant economies and fewer jobs for young people.

According to Brown, the economic reality is no longer how each trade bloc develops on its own but how it makes the most of globalisation. He makes the following points:

Europe must rule out tax harmonisation – which means uniformly high tax rates – and allow countries to compete on taxes. Otherwise, capital will flow to countries outside of Europe with more competitive tax rates and regulations.

Europe must reject a federal fiscal policy – spending and deficit decisions should be made by national governments accountable to their voters.

On economic reform, the right response to global competition is to liberalise, deregulate, remove the old state aid subsidies and remove barriers that hamper companies crossing borders.

Europe must embrace labour-market flexibility as the route to full employment, put current and new regulations to that flexibility test, and devise new incentives to help people move from welfare to work.

Europe must be outward-looking and internationalist, explicitly rejecting protectionism and parochialism.

This is the economic challenge for Europe to meet, says Brown, to be flexible, competitive, reforming and open, and the new institutional arrangements should reflect this.

Source: Gordon Brown, Old Europe's Choice, Wall Street Journal, October 16, 2003, and Editorial, Britain's Trumpet, Wall Street Journal, October 16, 2003.

For Brown text (WSJ subscription required) http://online.wsj.com/article/0,,SB106627705359596900,00.html

For Editorial text (WSJ subscription required) http://online.wsj.com/article/0,,SB10662571044744900,00.html

For more on Globalisation http://www.ncpa.org/iss/tra/

FMF Policy Bulletin/ 21 October 2003