Lessons from liberal reformers – good and bad experiences from across Europe

IMG_4901This year’s European Resource Bank took place from 27 until 29 June in the sun-bathed city of Aix-en-Provence. It was the 11th edition of the annual gathering of free-market think-tanks in Europe and the Friedrich Naumann Foundation for Freedom was there to present its vision of a Europe of freedom and democracy. The event was hosted by the Institute for Economic Studies-Europe, which also celebrated its 25th anniversary.

The rise of radical, populist and nationalist movements, like in France, is a threat for an open Europe of free trade. A series of sessions focused on different aspects ranging from the consequences of the European Parliament elections to tax competition. The Friedrich Naumann Foundation for Freedom had invited partners from across Europe to discuss different reform experiences in member states of the EU. The Economic Freedom in the World Index shows how wide the gap in economic freedom between member states of the EU can be: Finland being the highest ranking country (N° 7 out of 152) with an Index of 7,98, while Greece ranks at N° 85 out of 152 countries analyzed.

Zilvinas Silenas, President of the Lithuanian Free Market Institute, presented the reform agenda pushed forward in Lithuania during the financial and economic crisis. He however objected the common belief that the Baltic IMG_4896countries survived the crisis due to tough reforms and austerity policies. In his view, no real austerity measures were implemented, on the contrary, taxes and government debts actually increased during the crisis. Government debt just remained relatively low because it was unusually low before the crisis began. Furthermore, Lithuania is not a low tax paradise, as commonly believed. High social security contributions increase people’s overall contribution to the state, while the relatively big share of shadow economy in Lithuania leads to many people not paying any taxes.

In Greece however, things are even worse, as Panos Evangelopoulos, Assistant Professor of economics at the University of the Peloponnese, explained. In his view, the reforms carried out reluctantly by the Greek state are not successful because they do not tackle important issues: the size of the state and thus public spending, corruption and nepotism, etc. According to him the widely spread rent-seeking behavior of many people in Greece is being supported by the Euro and the huge public debt.

IMG_4899Sasha Tamm, Liberal Institute of the Friedrich Naumann Foundation for Freedom, talked about the German case, where though reforms were implemented at the beginning of the century that are currently being turned back. He took the example of the Hartz IV system of unemployment compensation, which was reformed in 2005. He presented evidence that this reform lead to decreasing unemployment while government budget increased. But, instead of continuing on the reform track by tackling issues of pension reform, etc. the tendency is roll back reforms. In his view, liberal parties have to continue defending tough reforms after they are being implemented. But, of course, it is always easier and more attractive to argue for new reforms and spending public money.

 

Julie Cantalou