Address by the Minister of Foreign Affairs of the Republic of Latvia
Ms. Sandra Kalniete,
representative of the Latvian government at the European Convention
Brussels, May 31, 2003 concerning the draft articles of the Constitutional Treaty on the Economic governance Mr. President Colleagues, In considering the articles of the draft Constitutional Treaty concerning economic governance in the European Union, we cannot avoid speaking about fiscal provisions and taxation policy. The issue of taxation is a highly important and sensitive matter for every state, insofar as it constitutes a vital relationship between the state and its citizens. Tax policy determines how resources flow from individuals or organizations to the state and how resources are distributed. Given the different structures of tax systems and development and welfare levels across the European Union, the flexibility to determine taxation policy is an efficient and powerful instrument that states can use to boost their national economies and increase their economic competitiveness. The current degree of harmonization of tax policy gives Member States the opportunity to establish an adequate fiscal framework to suit their domestic requirements. This provides the impetus for the less prosperous Member States to establish the necessary economic preconditions for the so-called "catching-up" process. As monetary policy is formulated and conducted from the perspective of the euro zone and therefore does not take country-specific circumstances into account, a fiscal policy remains the only available tool with which governments can address local economic issues. Given the above, I strongly urge the principle of unanimity voting in the Council on taxation matters be adopted and enshrined in the Constitutional Treaty. My second point concerns the proposed formalization of the Euro Group in a draft Article of the Treaty in the form of a Protocol. I believe that due attention should be given to the commitments and abilities of the new Member States with regard to their prospective membership in the Monetary Union. The new Member States will not be allowed to the join Euro zone earlier than 2 years after accession, even if they have met the Maastricht criteria. Consequently, the formalization of the Euro Group will mean that around half of the Member States will be outside of the Group, including all the new Member States. Those Member States will be left with a rather limited influence on the EU decision-making process as regards monetary policy. This could be a move towards a multi-speed EU. Therefore the issue of formalizing the Euro Group should be considered in light of the need to involve the new Member States, which are committed to being involved and which already meet the criteria which would make them eligible to shape EU monetary policy. Thank you for your attention!
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