Franco-German 'growth' plan looks to EU funds and taxes

20.01.12 @ 18:14

  1. By Valentina Pop
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BRUSSELS - A six-point plan drafted by France and Germany has suggested corporate tax "co-ordination," an EU financial transactions tax and the re-deployment of EU funds in troubled countries as ways to spur growth and jobs.

Following Standard & Poor's recent downgrade of nine euro-countries, including France, in which the ratings agency warned that austerity and budget cuts are not the way out of recession, Paris and Berlin have teamed up once more and drafted a six-page paper called "Ways out of the crisis - strengthen growth now!"

The paper - seen by EUobserver - is supposed to be discussed at the EU summits on 30 January and 1-2 March, the latter being a meeting especially dedicated to growth and jobs.

The financial transactions tax - a pet project of French President Nicolas Sarkozy ahead of his re-election bid in April - features among the six proposals under "efforts to reinforce the framework of financial market." On Monday, hours before meeting their colleagues from the other 25 member states in Brussels, the German and French finance ministers will gather in Paris to thrash out a common position on the so-called Tobin tax, named after the Nobel prize laureate James Tobin who initially conceived it.

Britain, Sweden, Denmark, Malta and the Czech Republic oppose the tax, saying it is counter-productive in the absence of a global deal which would stop firms from fleeing to tax havens in Switzerland or the Caribbean.

Even more controversial are plans for "tax co-ordination" and another Franco-German proposal to be put forward by end of February on the "convergence of their corporate tax."

"European institutions and member states should accelerate the process of tax coordination in order to foster growth, removing obstacles to the functioning of the single market and preventing tax abuse and harmful tax practices," the paper says.

Apart from the Tobin tax, both leaders want to speed up EU legislation on an energy tax and a "common consolidated corporate tax base."

The latter would introduce a common European formula for calculating a tax on the profits of multinational firms, a taboo topic for Ireland, for instance, where corporate tax is only 12.5 percent.

Another controversial proposal would have 25 percent of unspent EU regional funds in countries under a bail-out program or under serious economic difficulties redirected to a special "fund for growth and competitiveness." The money would no longer be managed by the national authorities, but by the EU commission "in liaison with the European Investment Bank." Projects financed by this fund should have "clear targets" that can be implemented in 2012, for instance loans to small and medium enterprises or research institutes.

The two leaders also want existing national programs under which people and companies can apply for EU funding to be revised "in order to improve their impact on growth and competitiveness."

Late payments to the beneficiaries of EU funding should also be reduced by lowering the ceiling to one month, the paper suggests.

As for employment-boosting measures, one of Sarkozy's make-or-break campaign themes, the document asks governments to instruct employment agencies to make an offer to every unemployed person - be it for a job, an apprenticeship or further training.

The EU commission is invited to make a comparative study to how short-term jobs and trainings are being used in member states during economic slumps. Labour taxes should be lowered throughout Europe, cross-border employment spurred. And a "social forum" should be held in the first half of this year.