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Luigi Einaudi, EU Competencies, Fiscal Policy and the Missing Maastricht Criteria

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Abstract

In his two pivotal works: For an European Economic Federation (1943) and The Economic Problems of the European Federation, (1944) written just before and during his Swiss exile, Luigi Einaudi listed the mandatory tasks of the European Federation. This would only be a start, for as he warned, only later experience would show whether or not the list should be extended. Einaudi does not mention any specific criteria to be used to select tasks for the European Federation. Using the principles of subsidiarity and fiscal federalism, this paper first analyses Einaudi’s allocation of competences to the European Federation. Comparisons are also drawn to his 1944 conclusions and other works on European Union (EU) competencies published nearly sixty years later. The second part of the paper deals with Einaudi’s recommendations on taxes to be levied by the Federation. He was skeptical of the system of transfers from member states to the Federation, but supported a system with its own autonomous resources. Today, this is a topical problem for financing the EU’s budget. The third part deals with Einaudi’s view on public deficits. Thanks to his work as member of the Italian Constituent Assembly, a principle advocating balance between spending and resources was introduced into the Constitution. As President, he interpreted this article as implying the equilibrium between income and expenses. Einaudi therefore anticipated the fiscal discipline introduced at the EU level with the Maastricht treaty in the nineties, and lately in several member state national constitutions. The fourth part assesses the results of EU’s fiscal discipline. Success in reducing the deficit and stabilizing the public debt before the crisis is undeniable. However, a balanced budget was achieved more by tax increases than through the reduction of expenditures. This occurred because of the “missing criterion” of Maastricht. In conclusion, the paper presents and discusses this criterion.

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Notes

  1. See Santagostino, A. 2011. Unless otherwise noted, all Einaudi references and quotations are to this book.

  2. For more in depth information concerning subsidiarity and fiscal federalism see for example: Baldwin and Wyplosz (2012), pp. 90–100.

  3. Op. Cit pp. 153-156

  4. One of the most prominent supporter of this line is Hans Magnus et al. (2012).

  5. I have developed this argument in my article, 2012a.

  6. Op. Cit. p.93-94

  7. Einaudi et al. (1947) p. 63

  8. Einaudi et al. (1947) p. 63

  9. See Stigler (1971), pp. 3-18.

  10. Op. Cit.pp. 17-45

  11. Op. Cit.pp. 64-65

  12. Op. Cit.pp. 206-207

  13. Alesina et al. (2011), pp. 5-8

  14. On this point see also: Emilio et al. (1960) pp. 505

  15. See: Zanone (2008). pp. 109-125

  16. This article has been amended in 2012 by a Constitutional law aiming at introducing the balanced budget principle in the Italian Constitution. The new article 81 entered into force in January 2014.

  17. Quoted by Stefania Martinotti Dorigo Ed., Interventi e Relazioni parlamentari, Vol. II and Repubblica 1945, p. 325

  18. Dorigo 1982 p. 474

  19. Santagostino et al. (2012b). Italics not of the text.

  20. Formally: Treaty on Stability Coordination and Governance in the Economic and Monetary Union.

  21. We refer here to the work of James Buchanan (1954), and to the work of Duncan and “The Theory of Committees and Elections” (1958)). Buchanan and Black are considered to be the fathers of the public choice school.

  22. Miti e paradossi della giustizia tributaria, Einaudi et al. 1938, pp.278. Also in: R. Romano (Ed.), “Luigi Einaudi. Scritti Economici, Storici e Civili”, Arnoldo Mondadori Editore, Milano, 1973, p. 167.

  23. L. Einaudi Corso di Scienza delle Finanze, Tipografia E. Bono, Torino, 1914 p. 382

  24. See for instance: European Commission (2013)

  25. On his point see for instance: Hans Magnus Enzensberger Op. Cit., 2012

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Authors and Affiliations

  1. Jean Monnet Chair ad personam of European Economic Integration, Yildirim Beyazit University, Ankara, Turkey

    Angelo Santagostino

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  1. Angelo Santagostino
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Correspondence to Angelo Santagostino.

Appendix

Appendix

Table 2 Euro-18 Countries Public Finance Indicators (1995–2012)
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Santagostino, A. Luigi Einaudi, EU Competencies, Fiscal Policy and the Missing Maastricht Criteria. Atl Econ J 43, 21–38 (2015). https://doi.org/10.1007/s11293-014-9439-x

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