No Brussels Sprout For Me, Please

Romania is getting closer to the moment of its European integration, scheduled for 1 January 2007, and thus finds itself closer into the web of interests of major European players.

This time European representatives show concern for Romania’s low budgetary revenues, saying these will not allow the country to match the EU funding to EU development programs. The quick fix would be for Romania to scrap its 16% flat income tax and go back to higher taxation levels.

I say quite the opposite: that we should not use for development the taxpayers’ money - be they Romanians or Europeans - , but those of private investors, via foreign direct investments.
Romania does not need more or higher taxes, which will result in discouraging business entrepreneurship and the zest for work; Romania does not need pre- and post-integration hand-out funds, but FDI to enable its economy to produce the merchandise Romania now imports from the EU countries.

The European voices that want to push Romania away from its liberal path come from Europe’s quarters where the social state is in a pretty bad shape.

It is very interesting this change of heart and public speech in our European friends, now that investment migrates from Western to Eastern Europe. Ten years ago or so, talk of Western pundits and officials alike was all about the East reforming and opening its economies to competition. Now, that the East complied and turned into an attractive market to West European capitalists, the finger is pointed at the latter for lacking patriotism and at Romania, among other nations in the East.

The talk is about it’s 16% flat tax being unable to provide enough budgetary revenues for development, but never about the same tax and other incentives making the country more attractive to private West Euroepan investors.

It is also telling that the most vocal opinions originate in Germany and France, the two core-EU nations with the highest taxes and a demise of the social state looming on the horizon.

These double standards and double-talk are more apparent when one looks at the figures: the EU treaties set the member states budget deficit to stay under 3% of GDP, which Poland and the Czech Republic complied with, but not so Germany and Italy.

The truth came out in the open, eventually: while Westerns were preaching the East to take the speed-lane towards liberalism and an economically integrated Europe, they were also drying out their own wealth, using it for consumption, instead of development.

Now it comes easier for the same pundits to blame the fiscal "dumping" in the East, than the lack of financial discipline in theor own Western countries.

It comes to mind as an exception in point the case of Ireland, dubbed the European tiger, for mustering an economic revival with similar low taxes as in Eastern Europe.

However, the lesson in the figures and in economic realities seems to be lost on core-EU nations like Germany and France, which seem more inclined to bring everybody else’s fiscal policies in line with theirs. Could little and poor Romania face such a big war and hold its ground?
The Irish showed that a little and poor nation could do just that.
Provided that its political elite would want it to.