WP 7 - The Political Economy of the European Union
The aim of WP 7 is to analyse the relationship between public finance and democracy in the EU’s multilevel political system. There is a connection between the institutional design of a democratic polity and the design of its tax system. WP 7 spells out institutional designs and policy options with regard to the system of financing and the allocation of taxing powers to the European Union. There is a close connection between a polity’s tax system and the purpose of public expenditure, and WP 7 also links such questions to the discussion of the European social model. The division of taxing and spending powers among different levels of governance is considered in light of the central aims of public action in the EU. WP 7 proceeds by identifying the conception of social integration underlying each RECON model, with particular emphasis on the relationship between solidarity, justice and democracy.
The key research objectives of WP 7 are:
- To describe the present socio-economic constitution of the EU’s multilevel political system, that is, the basic legal principles and social practices that define the framework for economic activity
- To describe and compare the national socio-economic constitutions and consider in what sense one can refer to a ‘European Social Model’
- To reconstruct the evolution of the division of tax, macro-economic management and social-regulation competences in light of RECON’s three models for reconstituting democracy in Europe
- To study the implications of the present division of power for the overall European socio-economic constitution, and
- To study its impact on the prospects for democratic decision-making at the European, national and regional levels
- To develop policy options and recommendations for institutional design
The research is undertaken with the aid of the three RECON models by analysing the substantive and procedural principles that make up the ‘European Social Model’. WP 7 undertakes case studies on the Europeanisation of personal taxes, the management of macro-economic policy, and the design of European labour-law standards, and indicators of the models are established within each of these. The study of the allocation of taxing and spending power in each model is central to the overall study of constitutional design in RECON, and WP 7 is thus closely related to WP 2 – Constitutional Politics and WP 9 – Global Transnationalisation and Democratisation Compared. The research in WP 7 further allows us to determine whether there is a supranational regime of social protection in the making, or whether the EU only adopts regimes of privatisation, deregulation and fiscal austerity, which can be seen to constrain the democratic performance of the nation state.
Each of the three RECON models implies a certain relationship between European, national and regional taxing powers. WP 7 analyses the transformation of national personal taxes as a result of European, in particular economic, integration. The creation of a single market is bound to lead to major challenges for national tax systems. What are the consequences of this Europeanisation of the socio-economic system? To what extent does the Europeanisation of markets imply the Europeanisation of communities of economic risk? Is there a need for a reconstruction of the tax equation in the EU?
Fiscal policy is a crucial element of stabilisation policy in a single currency area, however, in Europe most of the public spending is done by member states. Europe’s high unemployment, low growth and increasing social and political tensions, are undermining the legitimacy of European integration, and the implementation of the Cologne process as well as the Lisbon Strategy has been disappointing. WP 7 analyses this policy failure and devises strategies for improving the democracy legitimacy and efficiency of the governance of economic policies.
WP 7 explores the dual role of labour standards; as an essential element of the European Social Model, and as a key element in the management of political economy of the Union and the member states. The current status of European labour legislation is analysed in light of the prevailing theories, and the competing interpretations of European labour law are related to the competing models for reconstituting democracy in Europe. A critical assessment of the models will be made in light of internal coherence and social and economic effects.
WP 7 also addresses three ‘horizontal’ questions that will be considered in the specific research fields:
- Is the present configuration of the EU’s socio-economic constitution structurally biased in favour of certain policy outcomes?
- Does the present socio-economic legislation act as a constrainer or enabler of gender equality?
- What bonds of solidarity, of we-feeling among Europeans are required by the present socio-economic constitution in order to render democratisation effective?