martes, 9 de febrero de 2016

martes, febrero 09, 2016

World index of economic freedom tells us that EU should be broken up

The startling finding of the Heritage Foundation index for 2016 is how chronically 'unfree' the European Union still is

By Ambrose Evans-Pritchard

Lübeck, Germany, a throbbing port of the old Hanseatic League
Lübeck, Germany, a throbbing port of the old Hanseatic League
 
 
Britain has overtaken the United States in the global index of economic freedom, jumping three points to 10th place.
 
What is striking about the 2016 index released today by the Heritage Foundation is the shockingly “unfree” state of the European Union.

What you have is a northern free-zone clustered around the UK, Ireland (7), the Netherlands (16), and the Nordic-Baltic region of the old Hanseatic League, with Switzerland (4) as ever near the top, and safely beyond the clutches of Brussels and regulatory asphyxiation.
 
Or put another way, it is the Protestant alliance that battled reactionary Habsburg absolutism in the late 16th and early 17th Centuries – with Germany split within, torn in both directions.
 
This Northern grouping is roughly that which would emerge as a closely linked area of prosperity if Britain left the EU. In my view most of these states would also pull out within 10 to 15 years – de facto, if not jure – once Britain had set the ball rolling.

Supporters cheer with German flags in a fan zone in Hamburg, northern Germany, as they watch the Euro 2008 championships final football match Germany vs. Spain on June 29, 2008 at Ernst-Happel stadium in Vienna, AustriaGermany: torn between two economic poles?  Photo: AFP

 
Germany would be left trying to manage two deeply troubled blocs with demographic crises: a poor sphere to the East where a fragile rule of law is breaking down in one country after another; and a heavily indebted bloc in the South that is trapped in deflation and labour hysteresis, and has yet to claw back its lost competitiveness within the structure of monetary union.

The index shows that EU countries are on average less free than other countries with a comparable per capita income and level of development, an indictment that should give cause for thought. Several of them are disasters.

Greece is ranked “mostly unfree” and is deteriorating five years after it crashed into the arms of the Troika, which claimed to be pushing through reforms to make the country more efficient, transparent, modern and competitive – but was in reality collecting debts for northern creditors under false guise.
  Greece has dropped to 138 – sandwiched between Bangladesh and Mozambique – precisely because it has lost control over its economic levers and monetary policy. Capital controls have been relaxed somewhat since the banking crisis last summer, yet Greeks are still limited to ATM withdrawals of €420 a week.

Italy is only “moderately free” at 86. Heritage says it is plagued by high taxes and rigid labour laws. It has yet to sell off the rump of state-owned industries. Court procedures are “extremely slow”. State contracts are tainted by “high-level corruption scandals” and the “involvement of local organized crime.”

France is well-run but the state share of GDP has risen to 57.5pc of GDP, a Scandinavian level without Nordic labour flexibility. “The labour code's rigid regulations have hurt competitiveness and increased unemployment. Price controls affect a number of products and services,” it says.


Capital controls have helped pushed Greece down the rankings  Photo: AFP


Germany at 18 is the only other large EU state anywhere close to Britain in the rankings of economic freedom, which raises a pertinent question about the value of such a union in a fast-moving world of open trade and capital flows.

What is true is that EU membership has not actually stopped Ireland, Estonia, and the UK reaching the top 10, with Denmark close behind.

Britain has been able to climb up the rankings by cutting corporation tax to 20pc and shrinking the state share of GDP regardless. It is very easy to create a new business in the UK. Labour laws are flexible, while the US interestingly is slipping in the other direction. The claim that EU membership necessarily imposes crippling red tape is exaggerated.

So yes, the message of the Heritage report is that a country can keep most of its economic freedoms within the EU (provided it does not join the euro and suffer an asymmetric shock).

But is this a club of countries that is broadly aligned with the economic outlook of the British people?

A third of the union shares our economic philosophy. Two thirds do not. The EU is patently not an optimal political and economic area. It continues to exist only out of inertia.

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