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Brussels Recommends Sucking Spain
Dry with Increased VAT; France to Raise Sales Tax to Protect Jobs; Is There Any
Point or Reason for the Eurozone?
Political hacks are
on a roll in Brussels. Spanish unemployment is 22.8%, yet Brussels recommends
Spain hike its VAT.
Via Google Translate, please consider Brussels Again Recommend Rise
in Spain's VAT
The
European Commission hopes to discuss in the coming weeks with the new
government of Mariano Rajoy new fiscal
consolidation measures to compensate for the deviation from the deficit
target in 2011 that could exceed even the 8% vs 6%
agreed, and has advanced the VAT increase is one possibility among others.
"We were informed last week by the Spanish authorities of a sizeable
deficit, which should be 6% in 2011 and might be about or more than 8% according
to latest statistics we have received from Madrid. At the moment, we have no
elements to confirm these figures. We are not in a position to state here
that the figure will be higher or lower than 8%, "said at a news
conference the European Commission spokesman, Olivier Bailly.
Asked whether Brussels remains the recommendation for Spain to raise the VAT,
the spokesman insisted that "Spanish authorities are responsible for
deciding planning to take other measures to offset the deficit diversion in
order to meet the target of 3% in 2013 who are committed to comply ",
but insisted that raise VAT is one of the recommendations of Brussels.
"We made several
recommendations in the past, including last June. The VAT is one of them.
There are many others," explained without going into details.
Raising taxes in the
midst of an economic depression (which Spain is in), is pure insanity. Tax hikes will suck dry the already slim chance of a
Spanish recovery.
France to Raise Sales Tax to Protect Jobs
Eurozone economic insanity is staggering as this update on the "Social
Vat" tax proves. Please consider France Plans To Raise Sales Tax, Following Germany's
Lead
French
President Nicolas Sarkozy's government said Tuesday that it would borrow yet
another page from Germany's economic textbook in a bid to make France's
products more competitive and finance the nation's wide-reaching and heavily
indebted social-welfare system.
The proposal, which the government said would be implemented before this
spring's presidential election, calls for reducing the amount companies
contribute to the state-run health-care and pension systems. To make up for
the lost income, the center-right government would raise France's value-added
tax--a levy similar to sales taxes in the U.S.--which is currently as high as
19.6%.
The government says the measure, often referred to as "social VAT,"
would act as a powerful tool to protect French jobs, which are increasingly
being relocated to lower-cost countries.
French companies would enjoy lower labor costs, while imported
products--which would share the higher VAT burden--would help finance
France's welfare system. The country's state-run health-care and pension
systems are expected to have recorded a combined deficit of EUR18 billion
($23.3 billion) last year.
Social VAT "is good for France and it is good for jobs," French
Labor Minister Xavier Bertrand told France 2 television.
Germany increased VAT to 19% from 16% in 2007 to shift part of the burden of
social welfare onto consumers.
"Social VAT is antisocial because it is the consumer that will
pay," Socialist Party spokesman Benoit Hamon
said.
The French VAT proposal comes as Sarkozy struggles against rising
unemployment, a slowing economy and a surging trade deficit that is projected
to have reached EUR75 billion last year.
"We shouldn't talk nonsense," Jean-Claude Mailly,
the secretary-general of Force Ouvriere, France's
third-largest labor union, said on French radio. "It's not with one or
two points of VAT that we will compete with Chinese products."
Moreover, as France can't get near China's labor costs, social VAT would be
more of a competitive assault on France's euro-zone neighbors.
The measure is equivalent to a currency devaluation
because it effectively increases the price of imports and decreases the price
of exports. In the past, France repeatedly devalued the franc against the
mark to make its economy more competitive.
If other countries followed suit, inflation would still be pushed up without
any gain in competitiveness, said Eric Heyer,
economist at the OFCE, the French economic think tank.
"We created a single currency to avoid competitive devaluations," Heyer said.
Is There Any Point or
Reason for the Eurozone?
"We created a single currency to avoid competitive devaluations".
Indeed, that was one purpose wasn't it? The other purpose was to increase
trade. Now France is imposing a sales tax specifically to protect French jobs
from Spanish competition.
Just how is Spain supposed to pay back French and German banks if other
European countries seek to block Spanish exports?
I suggest Spain should not even try. It is futile. Since, Spain is going to
leave the Eurozone anyway, it would be better to do
it sooner rather than later as these actions by France proves.
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