“Who’s Picking Up This Bill?” : (Page 2)
July 18, 2012Horst Seehofer, the Bavarian minister-president, argues that Bavaria is not showing a lack of solidarity. ”It’s the transfer system which lacks solidarity.” Along similar lines, the chancellor has been arguing that transfers are also not the answer to Europe’s problems. She argues that there is a need for a “fiscal compact” for the euro area that includes the adoption of a new rule, restricting deficits by member states in their constitutions. Seehofer wants to argue that his counterparts in Germany need a similar dose of stronger fiscal discipline.
Two weeks ago, German lawmakers in Berlin approved the new EU budget discipline pact as well as the euro zone’s permanent €500 billion ($623 billion) rescue fund. Two-thirds of all lawmakers in the parliament’s lower house endorsed the two sets of legislation in a late night session. Merkel put herself on the line by arguing that the fiscal pact and rescue fund send “a signal of unity and determination, domestically and abroad; a signal toward overcoming the European government debt crisis sustainably, and a signal that for us Europe means our future.” Merkel won that vote, but she still got political blow-back from Minister-President Seehofer, who has threatened to let the coalition in Berlin collapse if the chancellor were to ask for further compromises to help the troubled euro member states. This new attack on the domestic subsidies issue has left some speculating that the Bavarian leader is exploiting both these issues a year before both his state elections, as well as the federal elections in September of 2013.
Yet there can be no doubt that Germans, in Bavaria or throughout the rest of Germany, are agitated by the unpredictability of the economic situation and by the solutions proposed to solve it − whether it be within the national borders or within Europe as a whole. As the old German song goes − “wer soll das bezahlen?” − remains an unanswered question.
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I suspect this has been done, but I could not help but wonder after reading this whether there are any papers that compare the sharing of revenues between states in Germany and states in the US in specific policy (or even spatial) context, such as transportation infrastructure, water infrastructure, or military spending.
This article omits one minor and two major points that bear on the transfer union question. Minor: besides Bavaria, Baden-Wuerttemberg, and Hesse, Hamburg, a northern state but a rich one, also provides transfer funding. Major: the constitution, the Basic Law, provides (Article 72) that “The Federation shall have the right to legislate…to the extent that establishment of equivalent living conditions throughout the federal territory…renders federal regulation necessary in the national interest.” Article 107 (2) provides that [Federal law] shall ensure that the disparate financial capacity of the Laender shall be appropriately equalized.” So intra-Land transfers are constitutionally anchored. Also, since 1990 there has been a truly massive transfer of resources, almost two trillion (yes, trillion) euros so far, from the western to the eastern states to carry out the constitutional requirement of “establishment of equivalent living conditions throughout the federal territory.” This massive transfer is being mainly financed by a “solidarity surtax” on personal incomes, which is to remain in effect until 2019 at least. So both the principle and practice of a transfer union are firmly established in the Federal Republic. Bavaria’s appeal to the constitutional court is motivated by the CSU’s effort to project itself to Bavarian voters as Bavaria’s chief protector in the hope of regaining in the next Land elections the absolute majority in the Bavarian Landtag that the CSU had for many years but lost a few years ago.