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among other things through the establishment of a common borrowing capacity a proposal that has completely vanished just as when it comes to spending more on defense european countries demonstrate admirable activism and flexibility in interpreting the rules categories growth global economy tags draghi report eu growth ict innovation investment deficit labor productivity public investment r d sustainability technology total factor productivity wages without a true industrial policy rearm europe is just a massive redistribution scheme march 13 2025 leave a comment this is a deepseek translation with minor edits of my latest diario europeo published in the italian daily domani last thursday gathered in an extraordinary council meeting in brussels the 27 member states gave the green light to the european commission s rearmeurope package it is not my intention to discuss the appropriateness of large scale rearmament except to note that while it seems difficult to imagine a significant political entity without autonomous defense capabilities rearmeurope appears to have many blind spots firstly it is a plan focused on increasing national spending which does not address the main problem highlighted among others by the letta report in no uncertain terms how it spends for defense is for the eu more a problem than how much it spends with member states acting in an uncoordinated manner and weapon systems that do not communicate with each other secondly with a communication strategy that is to say the least reckless european leaders seem intent on conveying the message of an imminent military aggression by russia they are much quieter about how to counter the real risk the destabilization of the european project through interference cyberattacks and so on aimed at weakening the democratic process of european countries which is already not in great health and at empowering euro skeptic parties a destabilization project moreover that marks a convergence of interests between russia and the current american administration as demonstrated by vance s speech in munich in short one might say that to deal with putin we need fewer cannons and more hackers let s first see what rearmeurope contains and what its likely medium and long term consequences will be the commission aims to channel around 800 billion into defense spending this would come mostly from the activation of the stability pact s safeguard clause for four years government spending on defense would not count towards the pact s limits and would not trigger excessive deficit procedures then the commission will propose a scaled down version of next generation eu with 150 billion in common debt to be distributed as loans to member states for military spending the bill for rearm europe will be paid by the usual suspects at first glance this seems like great news for those like me who have always fought for common debt instruments and for the exclusion of investment spending from the stability pact s constraints but appearances can be deceiving this operation instead of being the first step towards a fiscal and industrial policy worthy of today s challenges risks becoming yet another noose that will tighten around the necks of eurozone governments in the coming years just look at what happened with the pandemic in that case too the stability pact s constraints were suspended and common debt was raised to be distributed to european countries in the form of loans and grants those funds were necessary and were used mostly well to keep european economies afloat but they were not for free they were mostly loans which piled up in debt for eu countries once the emergency was over and the stability pact came back into force that in the meantime had been reformed but in fact not really we embarked on a new season of fiscal consolidation which will presumably first claim as victim social spending but also the very objectives of next generation eu the ecological and digital transitions just look at the competitiveness compass announced with great fanfare to implement the draghi report which in fact does not mobilize fresh money but in the best tradition of the commission shifts resources allocated for past priorities to current ones waiting to shift them again tomorrow to future priorities this is why many european observers had a sense of déjà vu at the announcement of the possible use of cohesion funds for defense and this is why we can be sure that once the emergency is over brussels and finance ministries will return to the mantra of debt reduction which at that point will certainly not target defense spending in short however hard they try to sell it this is not a turning point with the temporary relaxation of constraints and the european loan program rearmeurope reallocates spending towards defense not today maybe but certainly tomorrow when the champions of fiscal discipline will demand sacrifices on social spending healthcare education and maybe even the transitions a true strategic autonomy what should have been done then as mentioned above the increase and rationalization it bears repeating of defense spending is an indispensable element of the attempt to equip the european continent with strategic autonomy but so is energy autonomy on which instead we continue to do things on a shoestring so is the opportunity provided by the trump administration s masochistic attack on the world of research which a forward looking european leadership should exploit to roll out the red carpet in terms of investments in the scientific research ecosystem for overseas researchers looking to escape an environment that has become toxic and last but not least so is investment in digital and environmental sustainability to try to turn the unavoidable ecological transition into a driver of growth and productivity in short defense should be one of many pieces of an industrial policy worthy of the name aimed at reviving europe s growth and making it less dependent on ancient allies turned hostile or on emerging powers it is bizarre one might say suspicious that all those who point to the example of the united states regarding military spending suddenly fall silent on the hundreds of billions of public investments that overseas administrations pour into the development of sectors like electric vehicles and artificial intelligence in other words we should have seized this crisis as an opportunity to redesign the entire european industrial policy system to serve strategic autonomy and growth with common spending tools with real solidarity among european countries rearmeurope does not involve grants but only loans effectively repudiating the main innovation that characterized next generation eu and with a rewrite of the stability pact that introduced permanent protection for investment not just in defense in the absence of a truly new and comprehensive industrial policy rearmeurope will certainly enrich some european corporations and many american ones without any impact on growth eventually further tearing apart the european social contract in a few years for euro skeptic parties and the foreign autocrats who sponsor them it will be payday categories emu governance global crisis tags common debt competitiveness compass diarioeuropeo eu european commission european defense industrial policy nato next generation eu putin rearm europe rearmeurope russia security social spending stability pact trump ukraine usa vdl von der leyen trump s war on friends and foes should we imagine a multilateral order without the us february 11 2025 leave a comment this is a deepseek translation with minor edits of my latest diario europeo published in the italian daily domani the first days of the trump administration were a roller coaster from proposals to invade allied countries to the idea of turning gaza into a resort passing through tariffs and the dismantling of the u s public administration amid all this the u s withdrawal from the beps base erosion and profit shifting agreements went largely unnoticed however this decision has significant consequences marking a further step backward in the global fight against inequality and tax avoidance by multinational corporations beps is an international agreement facilitated by the oecd to combat tax avoidance that is centered on two pillars the first establishes a minimum tax rate of 15 on corporate profits reducing incentives to shift profits to tax havens the second introduces algorithms to allocate profits and thus the tax base among countries based on the economic activity of multinationals revenue employees capital rather than their fiscal residence the goal is to stop the race to the bottom in corporate tax rates to attract multinationals the so called tax competition and prevent tax avoidance by these corporations the beps agreement despite its many flaws is an important attempt to coordinate international tax policies and combat tax avoidance by large multinationals it also introduces the crucial principle that tax competition should be fought because it limits the fiscal space of states depriving them of essential resources for public services and redistributive policies the u s withdrawal from this global agreement not only weakens its effectiveness but also clarifies if it were needed the interests that the trump administration will protect in the coming years guess what helping the rich only benefits the rich this is no surprise trump s first term was already characterized by regressive policies his 2017 tax reform for example drastically reduced the corporate tax rate from 35 to 21 and today the tycoon intends to lower it further to 15 what is more surprising is that some still try to defend policies benefiting the wealthier classes and capital by arguing that reducing taxes for the rich and corporations stimulates investment economic growth and consequently the well being of all the economic benefits granted to the wealthy in short would trickle down to the less privileged improving their living conditions this theory has been invoked to justify many tax reforms in recent decades from reagan s tax cuts in the 1980s to those of trump and macron an odd couple but united by their faith in trickle down in 2017 however the empirical evidence overwhelmingly shows that tax cuts for the rich do not produce the promised economic benefits for example a recent study by david hope and julian limberg analyzes cases of tax reforms in eighteen oecd countries over fifty years highlighting how tax cuts for the richest increase income inequality but have no significant impact on economic growth or employment on the contrary as other studies show to support growth and employment tax reductions should be concentrated on low income taxpayer recent work also shows that countries with more inequality are less capable of absorbing shocks and thus have more pronounced gdp fluctuations the mobility of the rich and capital global solutions are needed in short trickle down has no empirical support policies favoring the rich only benefit them what a surprise and do not trickle down to the poor exacerbating social disparities and hindering growth it follows that income policies finally reversing the thirty year trend of increasing inequality should play a central role among the measures needed to revive investment and growth this is where the problems begin one of the major obstacles to redistributive policies is the mobility of the rich and of capital large fortunes and multinationals can easily move to jurisdictions with more favorable tax regimes making it difficult for individual countries to implement progressive tax policies it is precisely this mobility that was and is used to justify the reduction of the tax burden on the wealthiest and fuels the arguments of the usual suspects claiming that even though there is evidence that growing inequality harms growth nothing can be done to counter it it is certainly true that for a single country especially a small one the room for maneuver is very limited and a lasting solution cannot be achieved without international coordination this is why the u s withdrawal from the beps agreements is bad news weakening global efforts to address a problem that by its nature requires a coordinated response europe seeking new alliances but in politics there are no empty spaces i know it is an abused sentence the u s withdrawal from the beps could be an opportunity for the european union to take the lead in international cooperation on taxation after all europe is not a small country and if it acts united it can leverage the size of its market in an international arena where power dynamics have become the new norm and not since january 20 the main flaw of the beps agreement is the unequal distribution of benefits which as it stands primarily favors advanced countries the eu could express its willingness to sit down and quickly revise the agreement making the profit allocation algorithm more advantageous for countries in the global south an alliance of the willing with emerging countries and the global south countering the attitudes of the trump administration could also include strong support for the zucman tax on wealth championed by the brazilian and now south african g20 presidency more importantly eu leadership in reviving the beps initiative could transcend the scope of international tax coordination it would also send a powerful message that the global community is capable of fostering cooperative frameworks independently of the united states unpredictable whims and political cycles a country that like it or not and i for one am far from pleased has increasingly become a hostile actor for friends and foes alike of course if europe has been timid on the issue of fiscal and tax cooperation there are many reasons including the presence within it of countries that are on tax haven lists ireland the netherlands luxembourg and have much to lose from the end of tax competition but who knows with the undergoing transformation of the global rules system into a wild west even for these countries losing their status as tax havens might ultimately prove far less problematic than an all out war categories fiscal policy global economy growth tags beps diario europeo diarioeuropeo economics economy fiscal cooperation fiscal dumping g20 global south growth income distribution income policies inequality multilateralism oecd politics tax tax competition tax justice taxation of multinationals taxes trickle down trump zucman tax the american lesson radical is not a dirty word november 19 2024 leave a comment note this is a lightly edited ai translation of the piece appeared in italian on the newspaper domani last week us voters delivered an unequivocal verdict donald trump returns to the white house winning both the electoral college and the popular vote this does not mean that the united states has become an extremist country overall vote shifts were limited but with a highl...