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Are European governments truly committed to the well-being of their citizens, or are they simply playing a game of numbers with fiscal rules that often defy logic? The panic that ensues at the mere mention of raising taxes reveals a deep-seated fear of compromising self-imposed fiscal rules, even if it means sacrificing public investment and, consequently, future growth.
Take a few recent examples. The German government has finally agreed on the outcome of its budget for 2025, with public investment ridiculously slashed to just 0.15% of GDP – a mere 6 billion EUR. For comparison, the German economic think tank has estimated that the country would need ten times more, or 60 billion EUR a year, to address pressing needs such as repairing its crumbling infrastructure or providing decent internet connections. The situation isn't much better in the UK; even with a Labor government, public investment is already below the EU average and is projected to decline further in the next four years, from 2.4% to 1.8% of GDP.
According to the Institute for Fiscal Studies, Germany and the UK have invested less in public goods than the European Union average of about 3.6% of GDP. But consider France, which in the past has invested more than 4% of GDP. Now, under the fiscal discipline procedure from the EU, France must cut spending, and as always, public investment is likely to suffer because it is the easiest thing to cut for governments in power.
The problem is that Europe is facing a wall of public investment needs in the coming decade like never before. It has been estimated that an extra 3% of GDP a year would be needed to create a clean energy economy, boost defense, repair public education, and take care of an aging population. Public investment increases productivity and growth. Pretending this can all be done without raising taxes is a lie, and not doing it means accepting that growth will be slower than it could be for years to come.
So, why are European governments so adamant about not raising taxes? Is it truly about fiscal discipline, or is it about something else? Could it be that they fear the backlash from citizens who are already struggling with the burden of high taxes? Or is it a lack of political courage to make tough decisions that could benefit the long-term growth and prosperity of their countries?
Whatever the reason, the fact remains that Europe is at a crossroads. It can either continue to cling to fiscal rules that often make no sense and sacrifice future growth, or it can take a bold step and invest in its citizens and their future. The choice is clear, but will European governments have the courage to make the right decision?
In conclusion, the panic of European governments at the mere mention of raising taxes is a clear indication that they are sacrificing public investment and, consequently, future growth. It's time for these governments to take a step back and reassess their priorities. Is it truly about fiscal discipline, or is it about the well-being of their citizens? The answer to this question will determine the future of Europe and its ability to compete in the global economy.
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