Left-wing revival raises big-business fears
A spectre is haunting Europe,' wrote Karl Marx and Friedrich Engels, 'the spectre of Communism'. That was in 1848.
Listen to some of the wilder comments from business-leaders and right-wing commentators on the return to power of faintly pinkish, centre-left governments in so many European capitals and you might think the spectre was back haunting the continent again, as if the iron curtain had never rusted away.
But is it really time to dust off that dog-eared old copy of the Communist Manifesto? Not unless you want to remind yourself of the second inflammatory line. 'All the powers of old Europe have entered into a holy alliance to exorcise this spectre.' The powers are still at it, 150 years on. In the old days, it was just as likely to be done with guns and repression. Nowadays, the exorcist's chosen weapons are blackmail and propaganda against the plans of popularly elected social democratic governments.
Europe's largest insurer, Allianz, has threatened to pull out of its German home base because of the government's proposed tax reforms, while Britain's right-wing The Sun newspaper has branded German Finance Minister Oskar Lafontaine the most dangerous man in Europe for his calls for harmonising taxes in Europe.
Mr Lafontaine and his French counterpart, Dominique Strauss-Kahn, who has called for changes in European Union voting rules to make it easier to ram through tax-harmonisation rules, find themselves the subject of anger and derision at home too.
And after surveying business federations across the 15-member EU for their opinions on tax harmonisation, the Financial Times declared: 'New Europe's business people are starting to respond. And the message to the politicians is clear: they hate it.' There is certainly something to worry about for those who still believe in the 'Thatcher Revolution', the painful economic reforms started in Britain in 1979 and followed by right-of-centre governments across Europe over the next two decades.
While his tax harmonisation plans cause trouble in Europe, at home, Mr Lafontaine is acting on his theory that small and medium-sized firms, the income-tax payer and the consumer have been squeezed too hard, too long.
Tax reforms forced through last week promise 20 billion deutschemarks (about HK$85.52 billion) in relief. Some of this will be paid for by a new eco-tax on fuel.
But to the fury of the conservative establishment, the burden will also be shifted more heavily on to big business.
Insurance companies and the electricity industry feel particularly penalised by a new tax on capital reserves.
Estimating the new tax would impose an extra 25 billion marks on utility companies, RWE, the energy and industrial group, threatened to follow Allianz in moving some of its operations out of Germany.
It warned it would cut investments designed to reduce dependence on nuclear energy, and thousands of jobs would be lost.
At the same time, encouraged by the minister's belief that purchasing power and domestic demand - not deregulation, restructuring and wage restraint - are the keys to a strong economy and bigger government revenues, private and public-sector unions have won pay rises far in excess of inflation.
Warnings of more job losses and further cuts in services to pay for this extravagance have fallen on deaf ears.
As the chairman of the parliamentary finance committee, Christine Scheel, explained recently, it was too early to talk of a budget deficit. It all depended, she said, on how tax revenues and the economy developed.
Meanwhile, there is political pressure from some socialist governments, again with Germany and France in the lead, for the European Central Bank (ECB) to lower interest rates.
This flies in the face not only of Germany's tradition of monetary prudence, but runs counter to the treaty establishing the ECB and compromises its independent image.
In Milan last week, a Congress of European Socialists and Social Democrats, attended by leading figures from ten EU nations, heard Portugal's Prime Minister Antonio Guterres call for a restructuring of public spending to lift investment.
All this is disturbing enough to supply-side purists and the former storm-troopers of the Thatcher-revolution. But it is not yet time to call in the Spectrebusters.
Not only is the ghost of Marx so enfeebled it can do little more than haunt Europe with the kind of neo-Keynesian spend-your-way-out-of-recession thinking now so beloved of the once-prudent Hong Kong Government, but it cannot even summon the strength to cross the English Channel.
Britain's Prime Minister Tony Blair told the same conference to adopt the 'culture of enterprise' promoted by US President Bill Clinton and called for further economic and structural reform, not harmonised taxes, to boost jobs and growth. To lower tax regimes like Britain or Ireland, harmonisation spells higher taxes and the end of their competitive edge.
And in the 'new states', the eastern areas of Germany which once toiled under communist rule, the wage agreements won by the trade unions will have little effect in the private sector. What the former east Germany has discovered is that flexibility and lower wages mean jobs. Capitalist western Germany thinks it can afford a little worker-power. The former workers' paradise to the east knows it cannot.
The rise of left-of-centre governments in Europe has alarmed some industrialists as proposals such as tax harmonisation threaten to do away with the Thatcherite policies much-loved by businessmen.
