Einaudi, EU competences, fiscal policy and the missing Maastricht criteria

In the first pages of his pivotal work: The economic problems of the European federation, firstly published in 1944, Luigi Einaudi lists the mandatory tasks of the European Federation. This would be a start for as, he warns, only later experience will show whether or not the list should be extended. Einaudi does not mention any specific criteria to be used to select tasks for the European Federation. Using the principles of subsidiarity and fiscal federalism, the paper first analyses Einaudi’s allocation of competences to the European Federation. Comparisons are drawn too with his 1944 conclusions and works on EU competencies published some sixty years later.

The second part of the paper deals with Einaudi’s recommendations on taxes to be levied by the Federation. He was sceptical of the system of transfers from Member States to the Federation, but supported a system of its own autonomous resources. Today this is a topical problem for financing the EU’s budget.

The third part deals with Einaudi’s view on public deficits. Thanks to his action as member of the Italian Constituent Assembly, a principle advocating balance between spending and resources was introduced into the Constitution. As President, he interpreted this article as implying the equilibrium between income and expenses. Einaudi therefore anticipated the fiscal discipline introduced at EU level with the Maastricht treaty in the nineties, and lately in several Member States national constitutions.

The fourth part assesses the results of EU’s fiscal discipline, before and after the outbreak of the crisis. It's undeniable the success in reducing the deficit and stabilizing the public debt, before the crisis. But the balanced budget was achieved more with revenue increases than through the reduction in expenditure. This occurred because of the missing criterion of Maastricht. In conclusion the paper presents and discusses this criterion.