Credit to Atlantic Council

By Nicholas Petsas

Equality is one of the foremost concerns of governments around the world yet it is also one of the most polarizing topics. Two definitions of equality shape the public debate: equality of opportunity and equality of outcome. In Europe, their system is based more on the idea of equality of outcome, whereas, the United States stands out as representing equal opportunity. The differing tax schemes in each country represent their view of equality. Tax systems that embrace equalizing monetary situations are progressive tax systems that try to redistribute wealth from the rich to the poorer members of society. The redistribution through taxes is done in many different ways even in Europe resulting in vastly different outcomes.

In this article the taxes that will be talked about are ones on individual income, most notably the marginal tax rates for each tax bracket. It is important to note because it would take many more articles to discuss the full implications of corporate taxes, capital gains, property, local, tax exemptions, loopholes, healthcare taxes, environmental taxes (thanks to the EU’s cap and trade system) and the European mandated value-added taxes, among many others. The numbers presented in this article are far lower than the percentage of income officially supposed to be paid. That being said, marginal tax rates are most well-known for creating disincentives to work which is consistent for the most part with what happens in Europe.

In the news as of late has been François Hollande’s proposal for a 75% tax on households making 1 million euros (1.3 million dollars). It was struck down by a constitutional court for technical reasons of being applied to households instead of individuals but also for potentially being “confiscatory in nature” meaning that the purpose is to intentionally harm the rich. Mr. Hollande used the proposed 75% tax to gather support from other ultra-leftists who would have supported the Communists instead in his recent election. This particular situation has caused many rich persons in the country to feel victimized by the populism and some have even changed citizenship to avoid the potential taxes.

Greece, the recent poster child for failed economic policy in Europe, has many problems that stem from lack of a tax culture. Before Greece’s financial troubles appeared Goldman Sachs worked with the Greek government to hide its real expenditures and revenues so that it could join the EU. Though marginal rates may be high in Greece, tax rates are as good as ignored, which leaves no surprise as to why the debt load is so large. Even politicians who are in power do not use the tax services during election season so the people will vote for them. Greece, a heavily cash reliant society, does not have a strong cash structure or culture and many simply evade or do not pay their taxes simply by receiving payments in cash so that it is not recorded. A major controversy amongst Greeks is the “Lagarde List” where several thousand rich Greeks and even politicians had Swiss bank accounts to evade taxes and the list was private but a reporter got a hold of it made it public and released names creating controversy because the finance minister’s family seemed to be eliminated from the list entirely. As if Greeks needed another reason to mistrust their government and refuse to accept austerity.

In conclusion the European tax question is one of great expanse and will be expanded upon in the future.

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by Nicholas Petsas

The United States of Europe, or excuse me, the European Union experiment is a long way from being solved. Taking different states and making them apart of the same union is exactly what happened in 1789 in the United States, but over the course of the years the states have become more intertwined with the national government.

This is the direction the European Union is headed in as well though it carries many implications. Solutions proposed to fix the broken union need careful examination. Suggestions such as Eurobank regulation, Eurobonds and Increased fiscal integration are all complex problems and it will likely take years for the issue to be fully resolved and implemented.

The first topic is Euro Bank Regulation which is one of the most popular solutions discussed in the media. The benefits of the European Central Bank (ECB) attaining greater control via and FDIC but for Europe would prevent future bank runs. Banks, on the other hand, will then have a moral hazard to act beyond their means assuming deposit insurance is in place which could still strain the system if the problem is systematic.

Other problems include complaints by Germany, Italy amongst others that their banks would become subject to regulation that would force them to open up liquidity. In the case of England, it isn’t even a part of the monetary union and it still would have to take part in banking regulation! Deposit insurance is also advocated for because of the turmoil caused by banks in different countries, which leads many to think that instead of an ECB regulated deposit insurance is unnecessary if each country has one.

Part of the reason that Europe is in the shape it is in is that investors treated every country in the EU equally by buying all bonds from each country nondiscriminatory. This was fine and dandy until investors realized that all European countries were not created equally and the PIIGS (Portugal, Ireland, Italy, Greece and Spain) have serious fiscal problems.

Eurobonds are appealing in that it actually would make buying European Unions backed bonds the equivalent of buying the collective risk of all European countries. This benefits the PIIGS because they can borrow at a lower rate to finance their debts, but Northern nations will be increasingly hostile to this concept as it raises their cost of borrowing. Many opponents would view this policy as a redistribution of wealth from the North to the South. But for some the decision is not whether to redistribute but by what means, and by market means seems the best option.

Increased fiscal integration is one of the most highly contested parts of the European Union but according to your author, it is THE most important facet in keeping the union around in a sustainable fashion. Inflationary levels, spending, GDP(Gross Domestic product) should all be indicators before inclusion into the European Union…oh wait, they all were but many countries, even Germany could not reach the agreed levels of fiscal sustainability. The EU should take a hint from the United States experience in the 1840’s when the federal government refused to bail out the states which caused every state to pass a balanced budget amendment.

Balanced budgets may be too drastic to put in place because states need to deficit spend to establish borrowing credibility. Despite the need to borrow, there is a serious necessity to unwind the social safety nets and increase competitiveness in the labor markets which are wreaking havoc upon budgets and growth. But most countries including France, and the United Kingdom would never give up their domestic sovereignty for the sake of the Euro.

The unpopularity of giving up sovereignty might become the doom of the Euro in the future if they cannot set up fiscal constraints along with their monetary policy.

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by Nicholas Petsas

Many Americans were classified as ‘angry’ in the exit polls following the 2012 elections. Unfortunately for those people, President Obama was reelected in an electoral landslide, though the close popular vote reflected discontent from the American public regarding the economy. A common response to the re-election of Obama was, “I’m going to move to [insert socialist country here].” The problem with these kinds of statements is that the country ‘inserted’ tends to be a place Tea Party Republicans would never want to live, such as Canada with its government run healthcare system. So, the purpose of this article is to analyze the European countries that would best, or worst suit election result migrants.

France, our revolutionary allies, is our first pit stop in Europe. The French healthcare system seems remarkably similar to Obamacare, especially with its focus on preventative healthcare. Economic textbooks in France even pervert classical economic principles. But if that doesn’t prevent Republicans from migrating, then Socialist leader Francois Hollande’s new deficit reduction proposal will do the trick: a 75% income tax on those making more than 1 million euros. Even the French are leaving.  At least the two groups would agree on keeping out immigrants, specifically from Muslim countries.

Next to the land that founded democracy, narcissism, and the belief that they were the premier city on a hill (until they weren’t): Greece. Their fiscal austerity program, combined with walling off Turkish immigrants, would be admired by Republicans, though the response by local unions, pensioners, and citizens to protest would be enough to make them take their gyros elsewhere. Greece’s tax plan, which is to not collect taxes, would be well received by Republicans and would bask in the ability to keep their hard earned money, drink at leisure and view some of the most beautiful sights the world has to offer…presuming transportation isn’t on strike.

Opposition to bailouts, obsession with inflation and an in-depth understanding of moral hazard would unify Germans and their American migrants. As the strongest country in Europe, Americans would be unnerved to find strength in unions and the welfare state intact (they are arguably the founding welfare state). Exports and dark beer is King in Germany which would be a surprise to the import laden, light beer capitalists of the West.

England, an English speaking country that gave birth to capitalism and many of the founding thoughts of our constitutional republic, is an interesting destination. Protecting the banks is an English past time, and on top of that, they refuse to let the European Union seize regulation. Autonomy from outside bodies like the EU would be well respected. But, the universal, single payer healthcare system that is nearly bankrupt would be a cause for fright, as well as the fact that the government is heavily centralized, with no official constitution and a Queen no less!

American’s are the ultimate competitors unless it is against immigrants, but they would benefit from the most competitive country in Europe: Sweden. Sweden is outperforming the rest of Europe and has benefited from restructuring the labor market and its social payments, something Republicans have been trying to push for years. But they also happen to rank low in inequality, yet high in efficiency as a result of “redistribution of wealth”. The heavy handedness of the government to produce this situation would be unsettling to some American migrants.

In conclusion, Republicans generally have nowhere to go that would fit their ideal system. But, this may actually be a good thing: persistently high unemployment, failed healthcare and social welfare programs are not admirable. Economic freedom makes the United States the envy of the world. The benefits of free trade, high capital, booming technological change, and little regulation will hopefully be unleashed and lead us out of recession before the rest of the world notices that European countries aren’t the only ones with economic troubles. Of all the countries in the world, the United States has the opportunity to make the best of its current situation, but that doesn’t mean it can’t learn reforms from Europe, such as the Swiss and Swedes.

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Courtesy en.mercopress.com

You would never steal you friend’s wallet. Why? Even if you were self absorbed and morally reprehensible, the $50 in cash you stood to gain could never outweigh the loss of your relationship and all its benefits. Even more, the reputation for shady dealing you would collect among your social sphere would cost you dearly in the long run.

Well, Argentina just stole Spain’s wallet.

After spending two weeks discussing the option, Argentinian president Cristina Fernandez fulfilled her “life-long dream” of solving the country’s energy problem by nationalizing YPF, the oil company which owns the rights to Argentina’s reserves. There is no mistaking this as an uncompensated, hostile seizure of 57% of the company from Repsol, a Spanish energy company.

Repsol’s stake in the company is currently valued at around $10 billion. In the grand scheme of the international economy, $10 billion is nothing. (Well, it’s enough to save up to 7.6 million children’s lives, but never mind that for now). 

The real affront is that Argentina so blatantly continues a tradition of disregarding respectable dealings within the international community. Two weeks ago I discussed how Argentinian nationalistic pride leads them to continue a claim over the Falklands, which they quite obviously do not own. Their economic record is no less disappointing.

First, in 2002, the country engaged in the largest sovereign debt default in history, and has been rightly banned from the international investment community ever since. Moreover, their government notoriously pursues protectionist trade measures. Even further, Argentina has refused to pay millions in compensation for breaching trade agreements as stipulated by international legal bodies.

The fact that Argentina so recklessly disregards its reputation and obligations makes Spain’s’ job difficult. Can they reason with the unreasonable? A 1991 bilateral international trade agreement between the two quarreling nations limits Spain’s ability to  impose retaliatory tariffs against Argentina, who claims that the nationalization of YPF falls under a clause protecting actions taken “in the interest of the people” (couldn’t any actions be justified on these grounds?).

Regardless, the fine print of a trade agreement shouldn’t prevent some body from reprimanding Argentina. Yet this seems unlikely. International bodies such as the WTO and World Bank lack the authority and intelligence to go above the narrow definitions of protocol and exact justice, even when the infraction is as obvious as this. In a climate of international law that is largely driven by politics, not the consistent and dependable application of justice, even Repsol’s compensation of $10 billion for lost assets is up in the air.

 This is the EU’s time to shine. One primary strength of the Union is to lend collective weight to the economic dealings of its members. In this case, EU-wide pressure on Argentina could certainly improve Repsol’s prospects. However, the EU is reluctant to take the measures necessary to defend Spain, as they have other, arguably more pressing matters on their hands than organizing 27 countries to sacrifice trade relations to benefit Spain alone. I think this is a shame and a waste of ability on the part of the EU to stand up for principles of free trade, solid law, and accountability that it applies within its own geographical and cultural block.

Luckily, we can rest assured that, even without immediate punishment, Argentina’s reputation for cheating foreign investors will eventually set in. When that day comes, the country will fall behind other business-friendly Latin American nations such as Brazil, Chile, and Peru. Maybe at that time Argentina will begin to take a closer look and amend its reputation.

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By Morgan Maxwell

Credit: fotojournalismus.tumblr.com

 

A European cold front, attributed to global climate change, has made headlines after claiming between 300-600 lives. Some reports even suggest that the death toll exceeds these numbers. Most of the deaths and injuries were sustained by Europe’s homeless population and were the result of hypothermia and exposure. In some cases the cold aggravated preexisting health issues which resulted in death. By February 6^th over a week of uncommonly low temperatures across the continent demanded global attention. Reports of radical casualties and instances of hospitalization came from over a half dozen European countries, and Bulgaria suffered particular devastation when a dam broke in the village of Biser. This small rural area was submerged in 8 feet of water and at least four people were drowned.

With temperatures reported as low as -40 degrees  governments are focusing their efforts on protecting the homeless. The Ukrainian government has established over 1,735 shelters, with aspirations to develop more, to provide much needed food and shelter.  Similar efforts are being made across the continent but countries combat a gas shortage along with the frigid weather. Russia is one of the nations most affected but the shortage but Poland, Slovenia, Austria, Germany, Hungary, Bulgaria, Romania, Greece and Italy are all suffering. This is reflected in the average gas price which is the highest the EU has seen in three years.

Credit: kuwaittimes

As this cold snap persists we see not only the wide scale destruction abnormal weather patterns can cause, but also some underlying problems with homelessness and international relations. Countries are working toward aid and relief efforts for those affected by the cold but it doesn’t address the greater issue of basic human needs going unmet. Of the 600, or more, loss of lives the majority were people without access to shelter. This, of course, is not true for every death. Some instances are reported as the result of alcohol fueled accidents. Still, this accounts for a very small percentage. Temporary shelters are a much needed quick fix but preventative measures need to be considered. While the right to shelter is not specifically addressed in the Universal Declaration of Human Rights in the case of extreme weather conditions it is directly tied to the right to life, liberty, and the security of person. It would be absurd to suggest that the government is responsible for providing housing to all of its citizens but it is perfectly reasonable to advocate more attention paid to the homeless population.

Additionally, it is important to consider how issues regarding weather and global warming are inherently international. Like air traffic and the post system this is one of the greatest arguments for organizations like the United Nations. In the case of this cold snap, and its effect on access to fuel, the Gazprom corporation claims Ukraine must be responsible for taking excess fuel from Russia. Regardless of whether this claim is true it emphasizes the importance of organizations that encourage international cooperation. The same can be said for non-internal relief and aid efforts. In the case of emergency response it is crucial to have international bodies in place.

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