commission on fiscal imbalance 合集

Unification has rendered this issue only more

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Unformatted text preview: new states compared to the old. True, large transfers have evened out regional income differentials, but failed to spur significant productivity increase and growth in the East. These transfers are even suspected to eternalize existing gaps by preserving outdated economic structures, by discouraging entrepreneurial spirit, and by inducing moral hazard. Irrespective of the asymmetries in favor of the East—which no German politician would dare to censure—, interregional solidarity had already come under attack before unification. In particular the equalizing effects of Finanzausgleich had been criticized not only because of questionable distribution criteria, but also because of entailing economic inefficiencies. Unification has rendered this issue only more pressing. Excessive solidarity is seen to entail absence of accountability, dearth of regional growth initiatives, lack of interest to develop own resources, and even moral hazard and waste at the state level. Economists and public finance experts have increasingly taken the view that the “corporatist” German approach to federalism is outdated and constitutes even a risk in the age of globalization. According to this view, modern government is expected to meet the challenge of markets—in the same way as the 7 private sector—, and it should agree to competition among public entities and institutions. It is obvious that German federalism must also be contemplated in the context of European integration. It is true that the European Union (EU), in her quest for an intergovernmental decision-making machinery among sovereign national states, has greatly benefited from German experience with its cooperative approach. The impact of German institution is clearly noticeable at the European level: the European Council (shaped according to the Bundesrat); ECOFIN (a derivative from the German planning councils); “guidelines” set by Brussels (according to German “framework legislation”); the European Central Bank (whose statutes follow the law on the Bundesbank); and so forth. But the German model has one important constituent that is absent at the supranational level: solidarity. This limits its usefulness for supranational integration where interregional cohesion is much weaker indeed. A “corporatist” model of federalism is therefore not acceptable for Europe—neither now, nor in the foreseeable future. Moreover, the pace of institution building at the European level has to look for new paradigms given the fact that Agenda 2000 aims at extending the EU toward Central and Eastern Europe. How could this affect German federalism? It is interesting to note that European integration has already induced the strengthening of regions—both economically and politically; that it has fostered a process of decentralization even in unitary states; and that elements of “competitive federalism” are now increasingly being discussed throughout Europe, and in Germany in particular, not only by 6 7 It is difficult to establish an...
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This note was uploaded on 03/06/2013 for the course ECON 220 taught by Professor Paulo during the Spring '13 term at University of Liverpool.

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