FULL-FLEDGED FISCAL POLICY COORDINATION IN THE EURO AREA 2014

FULL-FLEDGED FISCAL POLICY COORDINATION IN THE EURO AREA 

To,

The Right Honourable Prime Minister,      

Mr. Prime Minister, we are facing wide differences in fiscal parameters across Member States. The fiscal policy coordination aims to achieve fiscal consolidation across Member States. It needs to be country-specific level because Member States differ in terms of private debt and the target of public indebtedness. The lack of fiscal policy coordination underlying weaknesses in economic policy coordination across Member States and there are clear differences in fiscal behaviour and competitiveness across Member States as all brings to clear-cut divide between debtor and creditor counties in the euro area. Fiscal policy coordination will act for preventing the accumulation of imbalances across Member States and is positively raise tax revenue domestically. Fiscal multipliers are not constant across Member States. For instance, larger countries like Germany and France have always an advantage because of larger multipliers but small countries always have disadvantages because of smaller multipliers, loss of competitiveness in the foreign trade and an inability to control public expenditures and revenues. Larger countries may manage well without coordination but smaller countries may not manage well without coordination. Fiscal policy coordination turns out that small countries benefit more from larger countries fiscal policy coordination, gain of competitiveness in the foreign trade and ability to control public expenditures and revenues. Indeed, fiscal contraction does reduce output substantially. Fiscal coordination produces as large increase in output. Thus, we need coordinated action for increasing output so that we can improve labour and product markets and reduce fiscal deficits must be done by each Member States in the EU except Germany. I can say with confidence that small countries are not able to maximise output with uncoordinated fiscal policy actions. This is why I see banking union, fiscal union, economic union and political union as a necessary condition for putting european Member States on a firm footing to put a final end to the euro crisis and for building a more resilient and sustainable economic and monetary union in Europe. Coordinating national policies is not enough to bring eventual economic recovery. If political union in Europe goes significantly beyond the current state of affairs, then only the banking union, fiscal union and economic union will work. So we need a far-reaching degree of political union, otherwise banking union, fiscal union and economic union will be undone. Banking union, fiscal union and economic union was held to imply the need for a political union. If I am not mistaken, Winston Churchill was the first politician to call for the idea of United States of Europe when he delivered a famous speech at the University of Zurich in 1946. In fact, German Chancellor Angela Merkel expressed her support for eventual political union. Political union greatly augmented everything including taxing, spending and borrowing capacity at the EU level. Thus, political union will shift EU Member States to supranational institutions, overcome an existential crisis and to prevent a new crisis to occur again. What we really need is we would become one country that is “United Europe” that would become more united, powerful and all Member State has to stand only for the success.     

    

Mr. Prime Minister, obviously, if we want to overcome an existential crisis, prevent a new crisis occur again, building a more resilient and sustainable economic and monetary union, gain of competitiveness in the foreign trade and ability to control public expenditures and revenues political coperation is essential. I most humbly prayed you as a rersponsible leader, there is much to be gained by your political cooperation.

Mr. Prime Minister, please accept your excellency, the assurances of European Parliament, European Council and European Commission highest consideration of your political cooperation.     

                                                                         ATHINARAYANAN SANJEEVRAJA

                                                                                                                       

Copy to

The Federal Chancellor of Austria Mr. Werner Faymann

Belgium Prime Minister Mr. Elio Di Rupo

The President of the Cyprus Republic Mr.  Nicos Anastasiades

The Prime Minister of the Republic of Estonia Mr. Taavi Roivas

The Prime Minister of the Republic of Finland Mr. Jyrki Katainen

The President of the French Republic Mr. Francois Hollande 

The Chancellor of Germany Angela Merkel

The Prime Minister of Greece Mr. Antonis Samaras 

The Prime Minister of Ireland Mr. Enda Kenny 

Italy’s Prime Minister Mr. Matteo Renzi 

The Prime Minister of the Republic of Latvia Ms. Laimdota Straujuma

The Prime Minister of the Luxembourg Mr. Xavier Bettel 

The Prime Minister of Malta Mr. Joseph Muscat 

The Prime Minister of Netherland Mr. Mark Rutte 

The Prime Minister of the Portuguese Republic Mr. Pedro Passos Coelho 

The Prime Minister of Slovakia Mr. Robert Fico 

The Prime Minister of Slovenia Ms. Alenka Bratusek 

The Prime Minister of Spain Mr. Mariano Rajoy