by rz
Thu Jul 16th, 2015 at 05:14:36 AM EST
Disclaimer: I really want to write a few more diaries. But I do not have the time to got through the web and search for the references. So you have to trust me! Let me also credit 'some story written somewhere' with the idea for the title where the Following was pointed out.
The democratic deficit of the EU has turned into a democratic insolvency
Now the lack of democracy on the EU level has been discussed quite often. But I have always found this discussion to be to imprecise. Democracy can not mean 'my ideas should be implemented'. Very often it can absolutely mean the opposite. Now I want to try to point out several clearly undemocratic feature of the EU.
A lot could be said about this. For example the nature of the Eurogroup meeting, where ministers seam to meet to conspire against the democratic will of the European people. However all this is relatively ill defined. I want now to focus on two key features which make any change in actual policy basically impossible. No matter how large the majorities.
The European Central Bank
Independent central Banks are all the rage toady. But the European central Bank is quite unique in the sense that its independence is protected by something akin to a constitution. In all other countries the independence of the central bank is established by law. Which means in principle independent central banking can be abolished by the normal majorities need to pass a law.
The question of the nature of our central Bank has today become quite urgent. The central Bank has failed now for at least three years in a row to fulfill its inflation Mandate and the German representative on the ECB board openly advocates to abandon the inflation mandate as a means to force specific policy choices one the EU member nations.
In Cyprus and Greece the ECB went even a step further. While in principle its duty is 'to guarantee a functioning payment system' the Banks in Greece have now been closed for almost three Weeks. The destructive impact is massive. While the ECB tries to hide behind the problem of Greek banks holding Greek debts, this action is clearly unlawful. The ECB could wind down Greek bank if they are insolvent. But stopping the payment system completely is a very extreme act.
I already wrote a diary about the actions of the ECB in 2011, when they enforced a specific set of policies on Italy and similarly on Spain and other countries.
The ECB is the most powerful tool in the Hand of the EPP and its affiliates. While Draghi might not toe the line of the Christian Democrats in quite the way Trichet did, in the end the ECB Governing board see itself as a enforcer for the EPP.
Without getting the ECB under full control of the European Parliament including the ability to order direct Government financing the democratic decision making within the EU is highly constraint.
The inability to tax capital gains
You heard it all, the rich get richer, and they get richer by taking the surplus value of our work. In general the quota of the amount of GDP going to capital gains is extremely high. Yet at the same the tax income from capital gains is low. Instead the IMF recommends to 'broaden the base' which means to make the effective tax system even more regressive by increasing VAT.
And there is no way out. The structure of the EU makes taxing capital gains on the level of a single nation basically impossible. At the same time taxing it EU wide is also impossible, since the there is no actual way to do this.
Therefore: Within the EU the possibility to tax capital gains has been abolished.
This is quite a crass situation for everybody who wants to create a somewhat fairer wealth distribution. The combination of not being able to print money and not being able to enforce tax laws makes every national democracy in the EU basically impotent against the power of moneyed interest. At the same time no supranational body exist which could actually do anything about it.
