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22МИРОВАЯ ЭКОНОМИКА
THE EUROZONE'S CONUDRUM: FISCAL MONEY TO SAVE THE EUROPEAN DREAM Ligorio V. (Russian Federation) Email: [email protected]
Ligorio Vincenzo - PhD in Politics, Associate Professor, DEPARTMENT OF POLITICAL ECONOMY, PLEKHANOV RUSSIAN UNIVERSITY OF ECONOMICS, MOSCOW
Abstract: after many attempts had been made in order to face current and ongoing economic crises in the Eurozone, this paper discusses the eventuality to adopt a tool know as fiscal money in order to restore fiscal space in those Eurozone's countries such as Italy et al. which have been facing a long period of austerity imposed by EU's authorities. The following proposal in form of Tax Credit Certificates would be an alternative to those measures in order to re-boost again growth and face the socio-political problem of disaffection of the European foundation values as well as avoid the Eurozone's collapse. Keywords: Eurozone, euro, currency, austerity, GDP, public debt, European Union, Tax Credit Certificate.
ЕВРОЗОННЫЙ КОНУС: ФИНАНСОВЫЕ ДЕНЬГИ ДЛЯ СОХРАНЕНИЯ ЕВРОПЕЙСКОЙ МЕЧТЫ Лигорио В. (Российская Федерация)
Лигорио Винченцо - кандидат политических наук, доцент, кафедра политической экономики, Российский экономический университет им. Г.В. Плеханова, г. Москва
Аннотация: после того, как было сделано много попыток столкнуться с текущими и продолжающимися экономическими кризисами в еврозоне, в настоящем документе обсуждается возможность принятия инструмента, известного как финансовые деньги, для восстановления финансового пространства в этих странах Еврозоны, таких как Италия и др., которые столкнулись с долгим периодом строгой экономии, введенной властями ЕС. Следующее предложение в виде сертификатов налогового кредита было бы альтернативой этим мерам, чтобы вновь стимулировать рост и столкнуться с социально-политической проблемой недовольства ценностями Европейского фонда, а также избежать краха Еврозоны.
Ключевые слова: Еврозона, евро, валюта, строгость, ВВП, государственный долг, Европейский союз, Сертификат налогового кредита.
Introduction
"...The time has now come to get rid of these old cumbersome burdens and to be ready for whatever turns up, usually so different from what was expected, to get rid of the inept among the old and create new energies among the young. Today, in an effort to begin shaping the outlines of the future, those who have understood the reasons for the current crisis in European civilization, and who have therefore inherited the ideals of movements dedicated to raising the dignity humanity, which were shipwrecked either on their inability to understand the goal to be pursued or on the means by which to achieve it have begun to meet and seek each other. The road to pursue is neither easy nor certain, but it must be followed and it will be done!" [1]
The words quoted above are the closing part of the "Ventotene Manifesto", one of the major sources of inspiration for a plan forward a federation of European Countries.
Today many are the threats which Europe has to face and fight against in order to do not destroy a project which lead - since the end of the WWII - our continent to be a place of peace and prosperity.
Indeed if we consider all the challenges which undermine the European implant, such as the great recession, Brexit, migration crises and others, we easily see how they reinforce populisms across the old continent thus diminishing fidelity and trust on both European institutions and Europe as philosophical idea.
In this paper we will focus on the current economic policy path followed by some Eurozone (EZ) countries which will undermine - not only according our modest opinion -the rules of the common currency area established in Europe, the European monetary union (EMU), originally based on the 1992 Maastricht Treaty and its further updates.
1. Eurozone architecture
To understand the faulty of a common currency area we have to investigate under whose assumptions had been sketch up.
The EMU architecture were based on two untable assumptions.
The first was the belief in a complete likely transition from simple agreement among few countries to the project - as dreamed by Europe's founding fathers - of the "United States of Europe" which would allowed a great number of "Europeans" to benefit of common rights. Despite many stages had been accomplished, this process had been stopped by a premature proposal for a European Constitution that albeit had received a wide approval being ratified by many member States, it was dramatically rejected through referendums by French and Dutch citizens, practically precluding any other future attempt to found those United States of Europe.
The second assumption on which Maastricht's was based is that liberal economic dogma which assert that markets will self-adjust toward full employment, central bank should focus only on price stability and be fully independent from governments. Just the fiscal policy is left under the national governments control albeit being subject to external control and while they address their domestic fiscal policy they have to fully fulfill Treaties' guideline.
Such logic - strongly wanted by Germany - shaped the European Central Bank structure, avoiding the main risk perceived in Frankfurt (Bundenskank side), to act as lender of last resort to governments. Further it is under this dogma that had been settled limits on deficit and governments deb t, regulated in the Maastricht Treaty [12] first and in the six Pack then.
It became quite clear that the adoption of a single currency - with consequent renunciation of national authorities in having any opportunity to influence or change monetary policy - would imply divergences among Member States in managing crises created by asymmetric shocks, natural consequence of Maastricht framework [8].
Despite a fiscal transfer mechanism had been established - see the structural funds and the cohesion fund - in order to stimulate the growth in those regions lagging behind, this result-ed quite insufficient in order to be considered an effective automatic stabilizer.
The Euro's defecitive structure was well known even before its implementation as Goldey wrote : " ... if all these functions are renounced by individual governments they simply have top be taken on by other authority. The incredible lacuna in the Maastricht program is that, while it contains a blueprint for the establishment and modus operandi of an independent central bank, there is no blueprint whatever of the analogue, in community terms, of a central government" [7].
The adoption of a common currency as the Euro had not only a negative impact, indeed it granted some benefits to the behind lagging member states of the EZ, despite this today we see that its deficient architecture is leading a descending parabola which slowly is undermining the confidence toward Europe as a "common house".
The adoption of the euro as single currency in tandem with a single monetary policy had two implications. Firstly the advantage of obtaining reserves from the EBC at the same discount rate for each domestic country had the effect of mitigating volatility of
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interest rate in the periphery countries of the EZ. To be more precise since the Euro was adopted till the beginning of the great recession we saw a substantial reduction of the interest rate of countries such as Portugal, Italy, Greece and Spain whose rates converged toward German's [14].
The second major implication is that adopting a single currency eliminate any possibility of exchange rate adjustments by domestic authorities. So that the value of the single currency - in our case the euro - against other currencies depend on the aggregate price competitiveness of the common currency area, Eurozone, as well as on financial markets. On this point we can say that since the euro was introduced we experienced an important lift of spread between long-term interest rates between the EZ and US, confirming the fact that during the period 2000-2007 - before the begin of financial crisis - financial speculation on the exchange markets did not played a relevant role.
Furthermore, small differences in inflation among the common currency area based on relative price competitiveness created a situation where countries as Italy and Greece historically with an high inflation rate had in the euro a strong currency and on the other hand made the euro a weak currency for such countries that experienced in that period an inflation rate below the currency union average, among all Germany.
As shown in the annex 1, this process allowed countries such as Ireland, Spain and Greece to close their gap with Germany in the period considered above, in term of rates of growth of their real GDP per-capita. On the other hand in the same time Germany introduced measures as labor market reforms which cause a decrease of unemployment rate, strong wage moderation and enhance price competitiveness, policies that failed to stimulate domestic demand l abeling Germany as "sick of Europe" due to its experience of low growth rate [6].
The combination of faster growth and enhance price competitiveness in the peripheral regions relative to core one, had a deep impact on current account balances relative to GDP, with negative effect for countries in surplus like Italy but with more harmful effect on Greece. The latter adopted the euro with a large current account deficit relative to GDP which open the door to a predictable increase net foreign debt position. A combination of relatively faster growth and price competitiveness decrease worsen the situation.
Regarding trade imbalances, yet, are more evident if we focus our attention on the trade of peripheral regions with the core regions. The result of the adoption of the euro in Greece, Spain, Italy and France turned the balance of trade into a deficit. The accumulation of private debt in those countries - which funded trade imbalances - had a mirror effect in the EZ inasmuch were credit in countries such as Germany but not only.
Then when the Great Recession hit with its bubbles the real estate/housing markets in countries as Ireland, Spain and Greece it turned to be very disruptive for EZ banks' balance sheets due to an high US toxic financial assets. In these countries governments were asked to intervene due to a systemic impossibility to restore growth and stability. In Ireland the government took the decision to move the burden of crisis from private to public debt bailing out banks in trouble.
In 2009 a new government took the office in Athens disavowing previous reports on both public deficit and debt, which resulted much more higher, causing an adverse response from financial markets as well as European institutions leading the country to a sovereign debt crisis.
The result of the Greek crisis - led by Papandreou's decision to ask additional liquidity to the as called Troika - alerted markets that Frankfurt would never be a lender of last resort even in case of high default risk of a member State. Consequently became evident that the common currency - Euro- had the status of foreign currency when repaying debt held by non-residents [3].
Another implication was that the growing spread in interest rates of other EZ member States - see not only Greek but also Italian vs. German - was basically due to the impossibility for the EZ's governments to use their monetary policy.
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As already remarked in another paper 5], the belief that fiscal austerity was more likely that an increase of taxation, it was backed by the theories that stated due to fiscal multiplier close to zero if not negative, any public expenditures cut would not result in significant GDP drop. The reality showed another scenario with larger fiscal multipliers registering the regrets of Troika's economists.
Indeed the EZ's periphery member main problem is not the size of whole public debts but rather those debts - public and private - held abroad, fiscal austerity in tandem with labor market reforms (substantial cut of nominal wages), "is thought to be an effective short-term solution in order to make debts sustainable, thereby increasing price competitiveness " [4].
If the austerity is adopted as a tool in order to boost growth through a substantial increase of net exports, this would not result effective in those example of trade agreement situation such as EU and in the specific the EZ because if wages and process are falling among all union member states, nobody will benefit of a relative advantage. This constitutes a situation where all the players lose (lose -lose), and where improvements are seen just in few countries in trade with external partners.
At the time of writing, we can still see that the major concern of EZ's and EU's institutions seems to be the strengthening of balance sheets of EZ's banks and the introduction of QE's policy with scarce results in those periphery States.
2. Fiscal Money to exit the crisis.
The figure that we see in Europe is of a depressed economy with a low inflation with an urgent need to boost demand, and with a common currency that exacerbates problem of adjustments. A depressed economy as the European would need a fiscal expansion that at current moment is not feasible due to a political veto. An alternative to fiscal policy is generally the as called "helicopter drops" which had been adopted by the ECB with scarce results inasmuch the money "parachuted" did not reach the soil but stopped at bank level.
In order to facilitate a real boost of aggregate demand, grow and unemployment rate drop, periphery States could adopt the instrument of "fiscal money".
The fiscal money tool will take form of Tax Credit Certificates (TCC) and or Tax-Backed Bonds (TBB) issued by Eurozone's crisis hitted member states to be used as quasi money. Both TCC and TBB would be complementary to the euro - often such solution is known as complementary currency - which as the power to boost domestic spending without generate additional debt. Being not a "legal tender" from the beginning as well as not being convertible by government into legal tender the fiscal money in the form described above will not break the absolute monopoly of money issuing hold by ECB. However both TCCs and TBBs could be tradable, negotiable or transferable to third parties as well as exchangeable in the market at discount or at par.
These certificates would allow holders to reduce their levies after two years from issuance. The referral of two years is due to the necessity to stimulate output grow through by the income multiplier effect and thereby avoiding for the government the balance deficit that TCC would cause in absence of other additional revenues. Indeed as explained above, TCC would trade for euros that could be immediately spent for current needs of holder such as pensioners, households and employees.
A Eurozone member state would start issuing TCC in order of 2% of GDP and assign them - free of charge - to enterprises in order to reduce their gross labor costs, employees and low-income households in order to increase their after-tax incomes and to fund or co-fund social expenditures or public investments. [10]
Assigning such certificated of credit to liquidity-constraint subjects whom generally have an high propensity to consume such assignments would a great instrument to support consumption and consequently production. Furthermore the reduction of gross labor costs for employers would improve external competitiveness with particular focus on those sectors export oriented. Indeed TCC would have a similar effect of currency devaluation without carries its risks.
One of the main objection which we can find is that regarding the increase of budget's deficit.
According the European System of Accounts 2010 (ESA) issuing certificates such as TCC does neither create a financial asset nor a financial liability since there is no an obligation biding a debtor to a creditor. TCC represents on the time of issuing just a contingent liability which should not be recorded in national accounts. Only when they will effectively used to pay tax less taxes they would be recorded in national account, which would occur in occur proposal only after two year of issuing. Thus we can easily affirm that TCC does not raise the national budget deficit on the issuing date.
Excluded the deficit's risk, even in a conservative assumption with a fiscal multiplier close to 0.8 a fiscal money program as TCC would prime a recovery trend - in term of GDP growth - not increasing the public debt / GDP ratio on the other hand. Under the assumption of a multiplier higher than 1 (1.1-1.2), would have affect positively the above ratio, as real GDP recovers and nominal GDP benefit from some inflation increase.
A government may adopt "safeguard clauses" in order to fully guarantee that in any case no increase of public debt would take place by TCC issuing.
The TCC program could also include additional flexibility tools in order to guarantee a constant decrease of debt/GDP ratio. One would be to postpone the use of maturing TCC for tax rebates in exchange of an increase of their value.
Despite timid improvements in some countries of the Eurozone a massive therapy is strongly needed if we want to jumpstart growth as well as if governments want to launch a signal to citizens and turn to growth expectation from stagnation one.
Radical reforms and structural are needed in many peripheral countries but those will not turn on a short-term mechanism of positive growth if not accompanied with other tools such as TCC and or similar.
References / Список литературы
1. Spinelli A., Rossi E. The Ventotene Manifesto. The Altero Spinelli Institute for Federalist Studies: Ventotene, Italy, 1941. P. 75-96.
2. Bossone B., Cattaneo L. et al. "Free fiscal money: revisiting austerity without breaking the euro". Associazione Paolo Sylos Labini, 26 November 2014 available at.
3. Cesarotto S. Controversial and novel features of the Eurozone crisis as a balance of payment crisis. In Post-Keynesian Views of the Crisis and its Remedies; Dejuan O., Febrero E., Uxo J. Eds.; Routledge: Oxon, UK, 2013. P. 111-129.
4. Amato M. et al. Going Forward from B to A? Proposal for the Eurozone Crisis. Economies. MDPI. 2016.
5. Ligorio V. The EU's Economic Crisis and Its Solutions: Latvian Crisis and Recover, is it an austerity Victory. International Scientific Journal, 2015. Pp. 198-201.
6. Engbom N., Detriagiache E., Raei F. The German Laubour Market Reforms and Post-Unemployment Earnings. IMF working paper WP/15/162. International Monetary Fund: Washington DC. USA, July 2015.
7. Goldey W. Maastricht and All That. Lond. Rev. Books, 1992. 14, 3-4.
8. Frankel J.A., Rose A.K. The endogeneity of the optimum currency area criteria. Econ. J., 1998, 108, 1009-1025 [CrossRef].
9. Zezza G. The impact of the fiscal austerity in the Eurozone. Rev Keynes.Econ., 2012. Inaugural Issue. 37-54 [CrossRef].
10. Bossone B., Sylos-Labini S. Strengthening "Mario's plan". EconoMonitor, 4 April 2016. [Electronic resource]. URL: http://www.economonitor.com/blog/2016/04/strengthening-marios-plan/ (date of access: 17.07.2017).
11. Meyer D. A concept of the euro as a parallel currency - A gradual solution for the eurozone's problems. Cap. Mark. Law J., 2015, 10, 390-409 [CrossRef].
12. [Electronic resource]. URL: http://ec.europa.eu/eurostat/documents/3859598/5925693/K S-02-13-269-EN.PDF/ (date of access: 25.12.2017).
13. [Electronic resource]. URL: https://europa.eu/europeanunion/sites/europaeu/files/docs/b ody/treaty_on_european_union_en.pdf/ (date of access: 25.12.2017).
14. [Electronic resource]. URL: https://data.oecd.org/interest/long-term-interest-rates.htm/ (date of access: 25.12.2017).
THEORETICAL ASPECTS OF INTELLECTUAL PROPERTY IN THE MODERN ECONOMY Ryabtseva E.M. (Russian Federation) Email: [email protected]
Ryabtseva Elizaveta Mikhailovna - Master, INTERNATIONAL ECONOMICS AND INTERNATIONAL BUSINESS DEPARTMENT, FEDERAL STATE BUDGET EDUCATIONAL INSTITUTION OF HIGHER PROFESSIONAL EDUCATION VORONEZH STATE UNIVERSITY, VORONEZH
Abstract: this article discusses the main aspects of intellectual property. Addresses issues such as intellectual property rights, protection of intellectual property. Special attention is paid to intellectual labour associated with the innovation as the protection of property in this area contributes to the economic development of the country by promoting healthy competition and encouraging industrial development and economic growth. In today's economy, intellectual property is a powerful impetus for the development of the country. Keywords: intellectual property, intellectual property, investment, patent, trademar.
ТЕОРЕТИЧЕСКИЕ АСПЕКТЫ ИНТЕЛЛЕКТУАЛЬНОЙ СОБСТВЕННОСТИ В УСЛОВИЯХ СОВРЕМЕННОЙ ЭКОНОМИКИ Рябцева Е.М. (Российская Федерация)
Рябцева Елизавета Михайловна - магистр, кафедра международной экономики и внешнеэкономической деятельности, Федеральное государственное бюджетное образовательное учреждение высшего профессионального образования Воронежский государственный университет, г. Воронеж
Аннотация: в данной статье рассматриваются основные аспекты интеллектуальной собственности. Затрагиваются такие вопросы, как права интеллектуальной собственности, охрана интеллектуальной собственности. Особое внимание уделяется интеллектуальному труду, связанному с инновациями, так как охрана собственности в данной области способствует экономическому развитию страны путем поощрения здоровой конкуренции, промышленного развития и экономического роста. В условиях современной экономики интеллектуальная собственность является мощным толчком развития страны.
Ключевые слова: интеллектуальная собственность, права интеллектуальной собственности, инвестиции, патент, товарный знак.
Права интеллектуальной собственности (ПИС) были определены как идеи, изобретения и творческие выражения, на основе которых существует публичная готовность предоставить статус собственности. ПИС предоставляют определенные исключительные права изобретателям или создателям этого имущества, с тем, чтобы
