Europe’s seven deadly sins (2/2)

Self-interest - Ireland

One can of course explain it as the Irish Minister of Culture did. “We are a happy people,” he said recently, “and basically an honest people. For foreign investors, those are the key points.” Definitely. The tax rates Ireland offers, viewed candidly, may however also go some way in explaining why this island in the Atlantic pulls in international companies like a magnet.

At only 12.5 percent, Ireland’s corporate tax is far and away the European flyweight in the field. The majority of EU countries, such as Germany and France, levy a corporate tax of 30 percent. In an internal market in which everyone should have the same competitive opportunities, how, pray, can there be such a gap?

Even before the debt crisis Ireland was attracting powerful multinationals by the dozen: Facebook, Intel, Pfizer, Merck, SAP, IBM – all came thronging to the island of Céad Mile Fáilte, the hundred thousand welcomes. The logic was beautiful, though highly insular: the more firms that cluster there, the more gentle is the hand of the state. The Irish government does now want to raise some taxes, but not the corporate tax.

In Dublin’s view, Ireland has to compensate for some natural competitive disadvantages – for example, that one cannot travel by train to the rest of the Union. Well, since when has that mattered to IT and insurance businesses? What’s more, being the only English-language bridgehead in the eurozone is no small matter. So then, Ireland: stay honest, uphold European solidarity, stay happy! J.B.

Arrogance - France

When the French nuclear group Areva made public in mid-December its plans to lay off several thousand employees, it was really no cause for concern for its employees.

“There will be no impact: that is the line the government has laid down,” Finance Minister François Baroin announced after the initial news of the proposed cuts had been leaked. Baroin then summoned Areva boss Luc Oursel. “There will be no decision that treats jobs as bargaining chips, regardless of what consequences a slowdown in global economic growth may have,” he insisted. Emphasis on French jobs taken note of.

In France, no one is surprised by such statements, which have been part of the raison d’état (the national interest) ever since Jean-Baptiste Colbert, finance minister to Louis XIV, the Sun King, began to run the economy with an iron hand. That the state owns an 87 percent stake in Areva is neither here nor there.

When the cash-strapped private carmaker PSA Peugeot Citroën recently announced job losses, industry minister Éric Besson also immediately promised that all jobs in France would be spared. The head of Renault, Carlos Ghosn, who wanted to outsource a small part of production to Turkey, was called in for a little chat as well.

The brakes that the state puts on developing production facilities in emerging countries is, by the way, an important source of the difficulties the French carmaker finds itself in today. It’s what happens when a state appoints itself the would-be protector of the economy.

Production costs rise, and the manufactured goods become too expensive. To counteract falling exports, the government raises protectionist barriers. A vicious circle. At best, by doing this the French government rewards unprofitable production. At worst, the Elysée abuses its power over companies as a political weapon.

French politicians become convinced Europeans if they can’t go any further on their own. This is what led to the creation of EADS, Europe’s largest aerospace and defence group, and has also prompted political interest in a shipbuilding alliance modeled after the aircraft manufacturer. Yet when the Germany company Siemens showed an interest in “rescuing” its troubled French rival Alstom, then Minister of Finance and current President, Nicolas Sarkozy, blocked its designs.

The same Sarkozy also brokered the 2004 merger of the Franco-German pharmaceutical group Aventis with the French company Sanofi, so smoothing the way for the third largest pharmaceutical company in the world. And at Sarkozy’s request, the formulation of a single market with “free and undistorted competition” was struck off the EU Reform Treaty.

How long will the European Union still be able to afford such hauteur? K.F.

Avarice - Britain

Did the British not hear the shot that went round the world? As if the financial world hasn’t been in meltdown these past three years, they go on believing that they can make up for the loss of their national industries by speculating on other people’s money – whose losses are their profits. Pigheaded and incorrigible, they cling to this so-called logic according to which the markets are invulnerable and to which politics and society will ultimately have to submit.

In this topsy-turvy world driven by an over-heated concept of ‘freedom’ handed down by John Stuart Mill and Adam Smith, a financial system in the City of London with no meaningful regulation was possible. All highly complex derivatives and asset-backed securities were traded there, which contributed decisively to the great crash of 2008. Billions of euros in savings and pension funds of ordinary bank customers were gambled away, but the London bankers themselves lost nothing.

The state debt crisis began when governments had to step in and absorb the banks’ losses. Despite that, proposals to involve investors in the risks brings only a loud hue-and-cry from London. And the transaction tax proposed by the German government, which demonstrably could put a stop to short-term speculation in the foreign exchange market, was described theatrically by Chancellor George Osborne as “a bullet aimed at the heart of London.” Anyone who can swim so inveterately against the stream should perhaps best go swim somewhere else. J.F.J.