Open Review of Management, Banking and Finance

«They say things are happening at the border, but nobody knows which border» (Mark Strand)


by Antonio Felice Uricchio and Filippo Luigi Giambrone [1]

ABSTRACT: The European Stability Mechanism (ESM) took the decisive step towards granting loans to states that are in danger of losing market access. Since then, public risk sharing in the euro area has risen sharply. Requirements for mobilization are designed to ensure fiscal sustainability. Additional fiscal capacity, in the sense of insurance through purely temporary transfers, does not increase the debt capacity. However, it creates strong political economic disincentives which weaken the regulatory framework of the monetary union and the sustainability of public debt at Member State level. The common monetary policy can only compensate for heterogeneous economic developments in the Member States to a limited extent. Different output gaps and inflation rates would require different monetary policies. With the loss of national monetary policy in the Monetary Union, national fiscal policy therefore has an important stabilizing function. Since discretionary measures can only take effect with delay (Michaelis et al., 2015), automatic stabilizers such as the tax system and unemployment benefits play the main role (Elstner et al., 2016). For them to work, public finances must be sustainable and public debt must be sustainable. There are now various calls for the creation of new fiscal instruments at European level. For example, the plan proposed from the European Commission (Next Generation EU).  French President Emmanuel Macron has renewed previous French demands for a budget and a finance minister for the monetary union. Similarly, ECB President Mario Draghi has called for the creation of new fiscal capacity and instruments for a stabilization policy at Union level (Draghi, 2018a). The necessity of a permanent new tax source requires an amendment of the Lisbon- Treaty, where Member States should renounce on part of their tax sovereignty in favor of the European union in order to provide a more effective macroeconomic stabilization function to resist towards asymmetric shocks like for example Covid- 19. The following article attempts to provide an insight into the future of the EU Commission’s plans. Furthermore, aspects of transfer payments within the financial equalization are given to the best of their ability to clarify how shocks are better smoothed out within a federal state. The aim of this article is to clarify the inevitable strengthening of the European fiscal union and to highlight the characteristic of the federal states in the sense that of the central revenue collection of certain taxes.

SUMMARY: 1. An ambitious and innovative EU budget for the European recovery. – 1.1 Introduction. – 2. Stability function of the ESM. – 2.1 What is it and how does the ESM operate? – 2.2 The economic reasons. – 2.3 The legal profiles. – 2.4 The regulatory framework. – 2.5 The legitimacy of light conditionality assistance. – 2.6 Enhanced surveillance. – 2.7 Who and how can question the precautionary credit lined issued. – 3. Financial equalization. – 3.1 The operationalization of financial strength. – 3.2 Financial equalization theoretical considerations. – 3.2.1 Preliminary remark: positive and redistributive financial strength. – 3.3 Problem of an operationalization of financial strength. – 3.4 Overview of possible operationalization models. – 3.4.1 The tax revenue models. – 3.4.2 Transfers and cost rates between local authorities as financial force. – 3.4.3 Economic analysis. – 3.4.4 Legal analysis. 3.4.5 Horizontal analysis. – 3.5 Normativity of the transfer concept. – 3.5.1 Economic objectives in fiscal equalization. – 4. Conclusions.            

1. The Commission has drawn up a bold and comprehensive plan for the recovery of Europe[2]. This plan, which is based on the common principles and values of the Union, is based on solidarity and justice. It sets out how to boost Europe’s economy, how to make it fairer, more robust, and sustainable for future generations, and how to drive the green and digital transition. The COVID-19 pandemic is felt throughout Europe and around the world. However, not only the economic and social impact of the pandemic varies considerably between Member States, but also their ability to cushion and counter the shock. This threatens to create damaging economic disparities between Member States and puts a heavy burden on the internal market as well. In Europe, ambitious coordinated measures need to be taken quickly, targeting where they are most needed. Massive public and private investment is needed to implement the development plan. Decisive measures are needed to reduce the overall public and private investment gap of at least 1.5 bio. EUR, remedied the immediate economic and social damage caused by the pandemic and the[3]Commission proposes to exploit the full potential of the EU budget to mobilize investment and bring forward financial support in the crucial first years of reconstruction. These proposals are based on: towards a path of sustainable and robust recovery: a European Building Instrument (Next Generation EU) for emergencies amounting to  EUR 750 billion [4]. This instrument will temporarily provide the EU budget with new funds mobilized in the financial markets. The mobilized funds will be made available through EU programs to support the immediate actions needed to secure livelihoods, boost the economy and strengthen sustainable and robust growth; strengthened Multiannual Financial Framework for the period 2021-2027. The Commission proposes to create new instruments and to increase key programs through Next Generation EU so that investment can quickly reach where it is most needed, strengthen the internal market, strengthen cooperation in areas such as health and crisis management, and provide the Union with a long-term budget that will help drive the green and digital turnaround and build a fairer and more robust economy. Together with the three main safety nets for workers, companies and Countries totaling €540 billion, which the European Council 23 April, these exceptional EU-level measures would be €1290 billion in targeted and early support for the 4 reconstruction in Europe. Conservative estimates of the leverage effect of the multiannual financial framework and Next Generation EU, the total investment that could be generated by this package of measures amounts to 3.1 bio. Eur. These measures are in line with the European Parliament’s calls for a comprehensive economic and reconstruction package for investment under the new Multiannual Financial Framework to support the European economy after the crisis[5] and the calls of the Heads of State or Government for a recovery fund with a sufficiently high volume, targeted at the most affected sectors and geographical parts of Europe and, in particular, to dealing with this unprecedented crisis.[6] This common understanding forms the basis for a rapid and comprehensive agreement between the institutions. The Commission calls on the European Parliament and the Council to cooperate very closely on all elements of this development plan and invites them to review annually expenditure financed by external assigned revenue under the Next Generation EU instrument. The principles of such a review could be laid down in an interinstitutional declaration. A swift agreement on “Next Generation EU” and an ambitious long-term budget will reaffirm European solidarity and determination at a time when the challenges could hardly be greater. A budget for Europe´s recovery and resilience contains: Sure/ ESM Pandemic Crisis Support /EIB Guarantee Fund for Workers and Businesses about 540 billion; Next generation EU with a temporary reinforcement of 750 billion and last but not least the multiannual financial Framework with 1 100 billion. The EU’s long-term budget, strengthened by the Next Generation EU, is predestined to drive recovery in Europe. The EU budget provides a transparent and trustworthy framework for the forthcoming massive investment program, as it enshrines the Community method of governance and decision-making. It is a proven engine for investment, cohesion and solidarity and strengthens the European internal market.[7] In recent weeks, the Commission has used the remaining flexibility of the current EU budget to spend the money available to save lives and secure livelihoods. These measures have shown that the EU budget is capable of supporting Member States in a crisis in a timely and comprehensive way. These instruments have also made full use of the flexibility remaining in the current EU budget, which highlights the urgent need for new measures to advance the next crucial phases of recovery. The principles followed by the Commission in drawing up its proposals for a modern and flexible long-term budget closely aligned with the Union’s priorities are still valid. The Commission now recommends adapting and strengthening these proposals in order to promote reconstruction in Europe. The considerable progress already made in the European Parliament and the Council is the best possible starting point for a rapid agreement. The dual transition to a green and digital Europe remains the key challenge of this generation. This is reflected in all the Commission’s proposals. Investing in a large-scale renovation wave, renewable energy and clean hydrogen solutions, clean transport, sustainable food and a smart circular economy have enormous potential for economic growth in Europe. The support measures should be in line with the Union’s climate and environmental objectives. Investing in digital infrastructures and skills will help to strengthen competitiveness and technological sovereignty. Investing in resilience to future health challenges and strategic autonomy will better prepare the Union for future crises. “Next Generation EU” will give the EU budget the extra impact needed to tackle the most pressing challenges. This will be a one-off emergency instrument, set up for a limited period of time and used exclusively for crisis response and reconstruction. The funds will be made available to Member States through the EU budget to support investment and reform priorities and will be used to strengthen the key financial programs for reconstruction, due to expire on 31 December 2024.[8] Mobilizing funds on the financial markets will help to spread financing costs over a longer period, so that Member States do not have to make significant additional contributions to the EU budget over the period 2021-2027. In addition, the Commission will propose new own resources that could facilitate the repayment of funds raised under the Next Generation EU instrument on the financial market. The rapid introduction of ‘Next Generation EU’ will be crucial to tackle the economic crisis. In order to provide funds to meet the most urgent needs as soon as possible, the Commission is also proposing to amend the current Multiannual Financial Framework 2014-2020 to provide additional funding of €11.5 billion as early as 2020. This additional funding would be allocated to REACT-EU, the Solvency Assistance Instrument and the European Fund for Sustainable Development, which would take into account the urgency of the need.[9]

 2.  ESM or not ESM? The reference is to the possible decision of Italy to join the Pandemic Support Crisis, the precautionary credit line approved and regulated on 8 May in Eurogroup and on 15 May by the Board of Governors of the ESM. A very different (and not examined here) issue is that of the revision of the Treaty establishing the ESM, as known to have run aground in December 2019. It should be noted that the intervention of financial assistance indicated is only one piece of a broader strategy put in place by the European institutions in the face of the exceptional nature of a crisis which, affecting all countries in a symmetrical manner, can, however, determine completely different and asymmetrical consequences, thus jeopardizing the very stability of the European design; a strategy of which it is highly desirable to include the instrument of genuine common policy announced by Chancellor Merkel and President Macron[10], based on the issue of European bonds and the subsequent distribution of resources to the countries most affected by COVID-19 for investments in the environment, digital and other crucial sectors for the relaunch of economic systems. The adhesion or not of Italy to the credit line of the ESM is among the most recurrent questions in these weeks in the institutional debate and in the comparison between economists, much less widely among jurists. And yet, the critical positions taken are frequently based on arguments which, at least implicitly, are also exquisitely legal in nature. As will be said, a first (albeit not unique) argument is that, as a result of sources of European law (Article 136(3) TFEU) and international law (Article 136(3) TFEU), it is not possible to find a single argument. It is feared, in particular, that these conditions, even if not provided for in the act in which the competent bodies of the ESM deliberate the aid, can be reactivated at a later time, as a result of a decision of the same ESM or as a result of judicial mechanisms that attest the contrast of the financial support operation with the European or international regulations. Here we intend to review and analyze the legal perplexities expressed by those who argue that the possible choice of our country to join the Pandemic Support Crisis is not without risks[11]. For an easier understanding of the legal issues that have emerged, however, it is useful even before framing the ordinary ways of functioning of the ESM: it is also appropriate to put before the indication of the implications in a broad economic sense to be taken into account in assessing the appropriateness of the decision under discussion.

2.1. In 2012, in the midst of the sovereign debt crisis, the ESM was born with the main purpose of providing financial assistance to Member States whose crisis could put at risk the entire Euro Area; as an instrument of European solidarity in the financial stabilization of the Euro Area, the ESM replaces already existing temporary institutions, in particular the European Financial Stability Fund (EFSF) and the European Financial Stabilization Mechanism (EFSM). The need for a stabilization and rescue mechanism was already felt in 2010 when some countries were on the verge of financial collapse. One of the fundamental principles of monetary union, the so-called bail-out ban, had to be taken into account. As a result of this ban, “the Union is neither liable nor responsible for the commitments undertaken by state administrations”: a substantial ban on the Union rescuing countries in difficulty. A temporary fund was therefore set up (the EFSF, which had already granted 175 billion euros in loans to Ireland, Portugal and Greece) and then a permanent one, the ESM.[12] The ESM is therefore an institution of international law, not of the law of the European Union, although it is linked to it by Article 136(3) TFEU (added in 2013). It is established and regulated by an international treaty; it is governed by three main bodies: the Board of Governors, composed of the Finance Ministers of each State and chaired by the President of the Eurogroup; the Board of Directors, composed of the Treasury Directors (or similar figures) appointed, together with an alternate, by each member of the Board of Governors; the Director General, appointed by the Board of Governors. The Board of Governors is responsible for the most important decisions, including the definition of the instruments of intervention and the recognition of financial support (Article 5, Treaty ESM). It has a subscribed capital of €704 billion, of which €80.5 billion is actually paid up; the capital is divided among the member countries into shares corresponding to the capital shares held by the national central banks in the ECB. Italy owns 17.79 per cent of the shares and is the third largest country after Germany (26.94 per cent) and France (20 per cent). Decisions are taken unanimously and, only in cases of particular urgency, by a reinforced qualified majority, equal to 85% of the shares subscribed: which means that Germany, France and Italy have de facto veto power. In framing the institutional and legal debate that is taking place on whether or not the Italian choice to join the anti-COVID-19 credit line approved by the Council of Governors of the ESM on 15 May is even more important to consider that, on the basis of the founding Treaty, the instruments of intervention of the ESM are varied. They may, in fact, consist:

– not only in loans to countries in crisis, the granting of which is expressly subject to the definition of macroeconomic adjustment programs (Article 16);[13]

– but also in precautionary credit lines (art. 14, Treaty ESM), distinct into precautionary lines in the strict sense of the term, PCCL (Precautionary Conditioned Credit Line), which involve a very attenuated conditionality; and ECCL (Enhanced Conditions Credit Line), the release of which requires a higher conditionality to be provided for in the Memorandum of Understanding (MoU).

The MoU, therefore, can grant not only aid to States in crisis, but also precautionary loans to countries that, while in sound macroeconomic conditions, still need help. Unlike loans to countries in crisis, the precautionary credit line does not presuppose but aims to prevent crises by acting as a safety net that strengthens the creditworthiness of the recipient country. The Pandemic Support Crisis is the second type of financial assistance intervention. It is no less important to note that adherence to the precautionary credit lines is a necessary condition (it is not certain that it is also sufficient) for the ECB to activate, under certain conditions, the OMTs (Outright Monetary Transactions), thus subscribing to the country’s securities also on the primary market and to an unlimited extent.

Conversely, the ESM stands as a “privileged” creditor with respect to other creditors.[14]

2.2. This being the institutional framework of reference, on 8 May 2020 the Eurogroup and on 15 May the Board of Governors of the ESM decided that countries could access the enhanced credit line (ECCL) accompanied by a single conditionality, i.e. that the resources would be used to support direct or indirect health costs related to the Coronavirus emergency. The credit line will be operational from 1 June, it can be used for expenses up to 2% of GDP (for Italy about 36 billion), will have a total amount of 240 billion euros and a maximum average duration of 10 years. Referring to the following considerations regarding the legal validity of this agreement, the first question to be asked is whether Italy’s accession to this credit line is economically advantageous. The issue deserves to be examined from a number of angles. The first aspect concerns the cost that Italy would incur by accessing this credit line, compared to the cost it would incur by using the market. As has been indicated [15], the ESM credit line would be at a rate close to zero against an interest rate of about 1.8 per cent that Italy today pays for 10-year government bonds: it has therefore been calculated that the use of the ESM credit line, as an alternative to the issue of government bonds of the same amount and duration, would lead to savings of about 600 million per year, for a total of 6 billion. Italy would, moreover, be the country that would make the greatest profit. If it is true, in fact, that Greece is in worse conditions (paying more than 2% interest on its securities), it is also true that it could benefit from a much lower level of financing: this, in fact, cannot exceed 2% of GDP (therefore no more than 4 billion for Greece). Other countries (Portugal and Spain) would have a more limited advantage, paying interest rates of around 0.9 and 0.8 per cent on their 10-year government bonds. For other countries, joining the credit line of the ESM could even be economically inconvenient by paying similar or even lower interest rates on their government bonds than those to be paid to the ESM (such as France and Germany). The assessment of economic convenience or inconvenience cannot, however, be exhausted by the above calculation. On the one hand, Italy’s access to the credit line made available by the ESM would allow the ECB to activate the MTOs, subscribing to our country’s securities, even on the primary market and to an unlimited extent.  It seems to be an argument destined, in the first instance, to significantly strengthen the assessment of the economic convenience in the broad economic sense of Italian membership of the credit line made available by the ESM, only if we consider the advantages that the mere activation of the MTOs can produce in terms of reducing the spread. So why not do it? What are the doubts for the economic moment? It has been argued that Italy’s failure to join, after weeks of hard negotiations, could even lead to the passing of inappropriate messages of exquisitely political positioning[16]. In truth, it is correct to observe that the adherence to the ESM does not automatically imply the activation of the MTOs, it is up to the ECB alone to decide it; it is a matter of verifying that the ECB considers the condition established for the Pandemic Support Crisis to be sufficient. In this respect, it should be considered that the assessment of debt sustainability, as well as the assessment of the fulfilment of the other conditions for access to the precautionary lines, have already been successfully carried out by the European Commission, the ECB and the ESM itself. In addition, it is necessary to compare the undoubted and reported advantages with the possible effect that, according to some, could have on the markets if adherence to the credit line were isolated and not collective: this is the argument of those who argue that individual adherence could signal to the markets that they are in greater difficulty than others. It is an assessment that it is up to the political institutions to make: with the clarification, however, that an isolated membership (though to be carefully assessed in all its implications) could not signal an objective difficulty linked to the economic fundamentals of the applicant country, as already positively evaluated. The evaluation therefore concerns the purely political sphere, at least as long as the State maintains adequate conditions of access to the markets.

2.3. In carrying out the broader political assessment, account must also be taken of the concerns expressed by some in the more strictly legal field.

To sketch out the doubts involved:

– the legitimacy of interventions of the ESM that are not accompanied by the provision of strict conditionality or with light conditionality, such as that relating to the health nature of the expenditure to be incurred;

– the importance to be assigned to Article 2(3), Reg. 472 of 2013, where it provides that the Member State receiving financial assistance on a precautionary basis from the ESM is subject to enhanced surveillance by the Commission. These concerns have been raised relatively:

– the possibility that, depending on the evolution of the debt-to-credit ratio that is established with the activation of the credit facility, the ESM itself will review in the future the original conditions, formalized in the Memorandum accompanying the granting of the financial assistance;

– the possibility that, in view of previous case law (Pringle 2013 case), a financial assistance intervention by the ESM not accompanied by strict conditionality may be declared contrary to European or international law.[17]

2.4. It is useful to briefly reconstruct the regulatory framework, citing three main provisions: Article 136(3) TFEU, Article 3 of the Treaty on the Functioning of the European Union, Article 2(3) of Regulation No 472 of 2013. Article 136(3) TFEU provides that “Member States whose currency is the euro may establish a stability mechanism to be activated when indispensable to safeguard the stability of the euro area as a whole. The granting of any financial assistance required under the mechanism will be subject to strict conditionality”[18]. Article 3 ESM Treaty states that “The objective of the ESM shall be to mobilize financial resources and provide stability support, under strict conditionality commensurate with the financial assistance instrument chosen, for the benefit of ESM Members that are already experiencing or are threatened with serious financial problems, if indispensable to safeguard the financial stability of the euro area as a whole and that of its Member States”. Finally, Article 2(3) of Regulation 472 of 2013 provides that “If a Member State benefits from financial assistance on a precautionary basis from one or more other Member States or third countries, the EFSM, the ESM, the EFSF or another relevant financial institution, such as the IMF, the Commission shall place that Member State under enhanced surveillance”[19].

2.5. Is an enhanced credit line (ECCL) accompanied by a single conditionality relating to the medical nature of the expenditure to be incurred in using the resources obtained legitimate?

For a position expressed in doctrine, that of the ESM is a functionalized activity, not free in its purposes, so that the ESM and its deliberative bodies could not depart from the conditions indicated in the founding Treaty, first of all those outlined in the cited art. 3, that is, the indispensability of the intervention with respect to the need to safeguard the financial stability of the Euro Area and the provision of strict conditionality.[20] The activation of credit lines in the absence of these conditions would constitute an ultra vires or, using a terminology in use in administrative law, a misuse of power, making the action of the ESM illegitimate.[21] The argument, in its clarity, is of fundamental importance and deserves to be examined by carefully analyzing the provisions of the Treaties. As mentioned above, Article 136(3) TFEU requires that the granting of any financial assistance be subject to strict conditionality, the exact consistency of which, however, is not indicated. More precise regulatory elements are provided by the ESM Treaty, i.e. the Treaty governing the stability mechanism to which Article 136(3) TFEU refers: it is difficult to think that there is a lack of coordination between the two sources and that what is regulated in the ESM Treaty with regard to the consistency of the conditionalities is irrelevant in interpreting and applying Article 136(3) TFEU. Well, the ESM Treaty states in principle in the aforementioned Article 3 that the conditions must be ‘commensurate with the financial assistance instrument chosen’, thus expressing an unquestionable need for gradualness of those conditions. A gradualness which is then clearly and explicitly expressed in the following Articles 14 and 16 of the same Treaty ESM. In distinguishing between mere credit lines (Article 14) and loans to countries in crisis (Article 16), the ESM Treaty makes the granting of the latter only subject to the definition of macroeconomic adjustment programmes. What is certain, therefore, is that the Treaty “excludes” that the imposition of a macroeconomic adjustment program is the conditionality to be applied to a country that merely adheres to a precautionary credit line.[22]

For these, in fact, Article 14, Treaty ESM, merely states that “the conditions associated with the precautionary financial assistance of the ESM are specified in detail in the Memorandum of Understanding, in accordance with Article 13, paragraph. Article 13(3) provides for the procedure to be followed when defining the MoU to accompany the granting of the financial assistance, while specifying that the MoU must be ‘fully consistent with the economic policy coordination measures provided for in the TFEU, and in particular with any legislative act of the European Union, including opinions, warnings, recommendations or decisions addressed to the ESM Member concerned’[23].

Unlike for loans to countries in crisis, with respect to which the ESM Treaty does not give the decision-making bodies of the ESM any margin of discretion in identifying the type of conditionality (which must always consist of an infrastructural adjustment programme), for precautionary credit lines, on the other hand, a discretion is recognized: Article 14, in fact, does not define the content of the conditionality, limiting itself to providing that it must comply with the economic policy coordination measures provided for by the TFEU. Furthermore, it is explicitly clarified that the content of the Memorandum of Understanding, i.e. the detail of the conditionality attached to the financial assistance, should reflect the seriousness of the weaknesses to be addressed and the financial instrument chosen. Was this discretion legitimately exercised in the case of the Covid credit line?[24] As is well known, when considering a discretionary power it is necessary, when verifying whether it has been exercised legitimately, to take into account the reasons underlying the decisions and choices made.  Well, the reasons that supported the decision to impose the sole condition relating to the health nature of the expenditure to be incurred do not seem at all unreasonable. It is decisive in this respect to take into account how closely the health reasons are intertwined with the economic and macroeconomic ones; said otherwise, it cannot escape the fact that a solid and lasting recovery of economic systems cannot but presuppose a stable overcoming of the health emergency and a strengthening of national health systems. In this exceptional context, the conditionality relating to the health nature of the expenses to be incurred with the resources of the ESM has a very strong economic value. This is what the deliberative bodies have highlighted in explaining the reasons underlying the definition of health conditionality: the exogenous and symmetric nature of the shock induced by the COVID-19, the previous application of the so-called “safeguard clause” under the Stability and Growth Pact, the fact that none of the euro area Member States is part of the corrective arm of the Stability and Growth Pact, have in fact led to believe that the provision of conditions limited to the obligation to use the funds for health expenditure related to the COVID-19 emergency is also appropriate in order to achieve the objective set out in Article 125(1). TFEU, i.e. the need to ensure sound budgetary policies of States. It does not seem irrelevant, after all, to consider that the documentation underlying the Pandemic Support Crisis (with the conditions of access to the credit line) was approved by the Parliaments of Germany, Finland, Austria, Holland and only later by the Board of Governors of the ESM.[25]

2.6. A further legal problem is posed by Article 2(3) of Reg. 472 of 2013, which provides that the Member State benefiting from the precautionary financial assistance of the ESM is subject to enhanced surveillance by the Commission. It is argued that enhanced surveillance may lead to “different assessments from the initial ones as the budgetary situation changes; … and in that case the Commission – by a majority, and therefore without the consent of the State concerned – may adopt a recommendation leading to a macroeconomic adjustment programme.”[26]However, the surveillance can only be calibrated to the concrete modalities of the financial assistance operation. More in detail, the enhanced surveillance, its logic, its objectives, its modalities are bound to be inevitably different depending on whether there is to “monitor” compliance with the macroeconomic adjustment program to be imposed on the country in crisis that obtains a loan under Article 16, Treaty ESM, or on the conditions established for the granting of the precautionary credit line. This is what has not unreasonably led the European Commission to argue that, in this case, such surveillance will be fully adapted to the circumstances and nature of Pandemic Crisis Support (letter from Commissioners Dombrovskis and Gentiloni). Thus, for example, reporting will only be limited to the actual use of funds for health expenditure and not for anything else; there will be no ad hoc verification missions other than those already planned for the European Semester.

2.7. As much clarified as the main legal issues, for the sake of completeness, it is appropriate to ask whether it is possible in practice (and with what remedies) to contest or challenge the precautionary credit line issued under the conditions defined by the Board of Governors of the ESM.[27]

It does not seem likely that it could be the ESM itself and its deliberative bodies to question the legitimacy of the operation, given that the ESM is bound, as much as the State that has obtained the credit line, to the memorandum and its conditionality. B. The risk has also been raised that the Court of Justice may find that the acts by which financial assistance is authorized without strict conditionality are unlawful. Reference is made to the substance of the previous Pringle in which the Court of Justice held that ‘the planned conditionality does not constitute an instrument for the coordination of the economic policies of the Member States but is intended to ensure compliance of the activities of the ESM, in particular, with Article 125 TFEU and the coordination measures adopted by the Union’ (27 November 2012, Thomas Pringle v Governement of Ireland and others, Case C 370/12, No 69 and 111)’. Without prejudice to what has been observed above, when examining the merits of the issue of the legitimacy of a health-only conditionality, can the act by which the ESM decides on a precautionary credit line be challenged before the Court of Justice? The question is answered by Article 37 of the ESM Treaty, which expressly provides for an arbitration clause under which a Member State, after having challenged before the Board of Governors the compatibility with the Treaty of the decisions taken by the ESM (for example, that of issuing a credit line with light conditionality), may challenge the decision taken by the Board of Governors before the Court of Justice.[28] It seems difficult, however, to hypothesize that, after having decided in favor of the conditions of the precautionary credit line against Covid, the individual countries, in application of the arbitration clause cited above, appeal before the Court of Justice against the intervention of financial assistance made by the ESM on the sole ground that, in execution of the decision taken with their decisive contribution, a condition of a purely health-related nature has been laid down. It should be considered that, as noted, all the documentation underlying Pandemic Crisis Support, as well as being unanimously approved by the Eurogroup and the Board of Governors, has been validated by some national parliaments, in particular those of Germany, Finland, Austria and the Netherlands. Nor does it seem that the individual countries can appeal against the act of granting the credit line with the general remedy of annulment before the Court of Justice: this remedy is in fact available against the acts adopted by the European institutions and these cannot be considered the bodies of the ESM.[29]

There remains the abstract possibility of an intervention of the national Constitutional Courts and the possibility that they decide to put before the Court of Justice the interpretation of Article 136, par. 3, TFEU (on which we refer to par. 4.2.) or, even, to evaluate the relationship of the ESM and its initiatives with the respective fundamental laws. It should be noted that there is no lack of precedents in this sense (even very recent ones) in the jurisprudence of the German Constitutional Court.[30]

It does not seem, however, that the case in question has similar scope and character to those that have called for interventions by the Court of Karlsruhe. On the sidelines the perplexities that some of those recent positions have aroused[31], here is under discussion a management act of an international institution approved also by the German Parliament and Government (as well as unanimously by the Eurogroup and the Supervisory Council) to face a very serious health emergency with strong economic-financial implications. A management act that, moreover, commits a share of the capital ESM well below the total subscribed capital, so that one of the two conditions that the Court of Karlsruhe itself indicated in 2012, ruling on the law ratifying the Treaty ESM, is certainly met.

3. Financial equalization

3.1. In financial equalization, financial strength is generally understood to mean the ability of a local authority to dispose of financial resources. This general definition is not very satisfactory when one considers the purpose of financial equalization[32]: the regulation of financial relations between local authorities is intended to ensure the financing of public tasks. However, the question of financial needs raised by admit requires, as a first step, the operationalization and measurement of financial capacity. Only after the financial scope of the local authorities has been explored can negotiations be held to determine which local authority has an allocation requirement and which is eligible for contributions. The financial strength is thus an indicator of the scope for planning and redistribution in financial equalization. This provokes the question of how to quantify financial strength. In the literature and in financial equalization there is little agreement when it comes to measuring financial power economically and developing appropriate measures. The legal definitions of financial strength in the respective regulations of fiscal equalization law also show a quite heterogeneous picture. Economic and legal definitions of financial strength are repeatedly criticized for leaving out of consideration a number of characteristics or indicators specific to financial strength. This criticism is and has been repeatedly taken as an opportunity to develop alternative concepts of financial strength definition and messing.[33] As far as can be seen, however, the majority of the concepts are based on purely economic-institutional considerations, although generally on a specific financial equalization system. The reference will only be sporadic and for singular problems often our cross-references to the legal concepts will be analyzed on the margins.[34] It is therefore a central concern of this section to develop an operationalization of financial strength that is valid for the current financial constitutional system, which can withstand a financial equalization-theoretical indicator criticism and at the same time can be a parameter for measuring financial strength. the operationalization should on the one hand be the basis for the subsequent positive-legal analysis, which examines the legal framework of the financial strength of the federal, state and local governments and compares legal definitions of financial strength with the operationalized financial strength. Secondly, it will create the basis for legal policy proposals to the fiscal equalization legislator.

3.2. Financial equalization theoretical considerations

     3.2.1. Financial strength is regularly discussed in the economic literature on fiscal equalization in connection with the allocation of tax revenues: [35]

on the one hand, the question is asked whether state revenues from certain taxes should be distributed according to financial power or to what extent the corresponding tax revenues should be allocated to the local authorities according to local revenue. In this context, we speak of allocations according to financial strength in a positive sense. On the other hand, financial strength is discussed as the basis for claims in burden sharing. The prerequisite for financial allocations from a central financial mass to a local authority should be that the financial strength of a local authority falls short of a comparative figure (e.g. financial requirements, but also average financial strength). Popitz describes the financial strength on which such an allocation system is based as reverse financial strength, since for a given benchmark the lower the financial strength, the higher the allocation. However, the financial strength can also be the basis for the obligation to make contributions (apportionments). According to this, the more financially strong a local authority is, the higher its contribution will be. The characterization of financial strength as inverse financial strength seems too narrow in this respect; it is more appropriate to speak of redistributive financial strength in the following.

3.3. If, to a welcome extent, levies are to be distributed according to revenue, a decision is to be made on the basis of the respective applicable financial constitution with regard to a specific financial equalization target. According to for example § 4 F-VG of the Austrian legal order, the distribution of taxation rights and tax revenues has to be carried out with due regard to the constraints of public administration and the limits of efficiency. Within this framework, the financial strength is determined according to the state law and economic objectives of the financial equalization partners. The determination and distribution of the positive financial power between the federal government, the states and the municipalities is determined by  constitutional policy determinants. Horizontally between comparable local authorities, the postulate of a fair, i.e. equal, distribution comes to the fore. This problem of justice arises independently of the type of redistribution measure used as a basis: if allocations or contributions are calculated on the basis of financial strength, the principle must be that operationalization does not make any entitled or obliged party poorer than they actually are. This applies even if the meaningfulness of redistribution according to financial strength is denied and the amount of compensatory allocations (contributions) is not calculated on the basis of financial strength.[36] Regardless of its concrete objectives (e.g. equality of start, uniformity of living conditions, minimum pension level, etc.) and compensation instruments, financial equalization cannot, of course, take place without affecting the financial strength of the regions involved in the equalization process. Only the postulate of the justice of the intervention always leads to a comparison between needs and financial possibilities and thus to the demand for justice in the measurement of financial strength. Particularly with regard to its function as a calculating factor, the problem of justice that becomes apparent in the operationalization of redistributive financial power is not insignificant. The legal financial power regulations show a quite heterogeneous picture. The differences concern, on the one hand, the measured variables involved and, on the other hand, the conditions under which the measurement is to take place. In the following, an overview of the differences of opinion existing in the literature on fiscal equalization theory is given.[37]

3.4. Among the operationalization models, a distinction can be made between those in which financial strength is calculated on the basis of the tax revenues collected and those in which financial strength is derived from regional economic variables (e.g. regional national income). In addition, the inclusion of other indicators is also being discussed, with special emphasis on other autonomous revenues, transfers and debt capacity.

3.4.1. In the case of the tax revenue models[38] triton encounters difficulties above all when the regions (local authorities) have fiscal sovereignty and the tax sources differ from region to region or comparable tax sources are exhausted to a different extent. If one limits oneself in such a non-uniform system to nationally uniformly regulated levies, then one must not accept, depending on their yield, that the financial power of the regions (local authorities) is distorted and incorrectly represented. The smaller the amount of the uniform levies, the more the inclusion of the non-uniform taxes is postulated. However, these should not be included in the amount of the financial power actually used, but rather, for the purposes of comparison, fictitious tax revenues should be remitted for the levies on the basis of a representative levy system. The requirements for the representative tax system depend on the financial constitutional leeway of the regions and local authorities. If the regions (local authorities) exploit different tax sources, it is suggested that uniform tax bases and notional tax rates be used. The fictitious tax rates are regularly determined by applying an averaging procedure by dividing the total revenue actually used by the sum of the fictitious tax bases. The construction of homogeneous tax bases regularly proves to be problematic. If the tax base is uniform in the federal state and only the tax rate is variable, a fictitious tax rate (quotient of actual revenue and sum of the tax bases) is applied to the actual tax bases.[39] The income models assume that taxes are paid for from running income and thus income is considered an indicator of financial strength. The nature of the income calculation with regard to the legal objective of measuring financial strength differences is not clear.[40] The questions are discussed as to whether the income generation for the regional allocation of income is to be assumed or whether it should be decisive where the incomes flow; which components of income sizes are not indicators of taxation (e.g. subsistence minimum); which tax sources are used up in the regions which are not accurately recorded by income figures and whether they should be taken into account in addition; whether there are differences in financial strength when regional incomes correspond to each other per capita, but the intraregional income distributions vary widely. The discussion reveals many different approaches to correcting income models, so that the advantage of easier handling compared to tax income models does not appear to exist.[41]Other own income as financial strength. In addition to taxes, the literature examines very different types of autonomous incomes in terms of their consideration as financial strength. In this context, public-law revenues (e.g. fees and contributions) such as private-law companies (e.g. from own companies) are discussed. It is disputed in the individual case whether the respective revenue is to be qualified as a financial force at all[42] and, if so, whether it must be taken into account in its actual amount accrued or whether the representative tax system should be extended to a representative revenue system. The Advisory Commission on Intergovernmental Relations (ACIR) takes the broadest view that fees and private revenue should be included in a representative revenue system. The same should apply to income (interest, rent) from the use of financial and physical assets. Insofar as the incursion of revenue is withdrawn from the sphere of influence of the local authority (e.g. gifts, penalties), it is assumed that their actual amount is taken into account.[43]


3.4.2.  Transfers are services at one local authority level for tasks of another (taking over tasks without reimbursement of costs, cost-sharing for external tasks), and reimbursements are payable by the local authority responsible for the task to the local authority which takes care of the task on behalf of the local authority.[44] As far as can be seen, there is broad agreement in the writing that revenue from contract tasks (cost rates) is not to be taken into account when determining regional financial strength. The reason for this is task-oriented: since the tasks taken over are functionally attributed to the contracting authority, the cost-replacement cannot be characterized as revenue for the purpose of providing (unattributable to him functionally) public services. In the case of transfers, however, the views differ: if financial strength is understood as the ability of a local authority to finance its tasks from its own autonomously procured resources, transfers are completely eliminated from financial strength.[45]However, the more financial strength operationalizations are dominated by the objective of recording the state activity of the respective regions, the sooner transfers are also included in the tax base of financial strength. In part, a distinction is also made according to the earmarking of the funds received: whereas general transfers should not be included, since (if) they are primarily intended to compensate for differences in financial strength, specific transfers should be taken into account.[46] The less beautiful term intragovernmental transfers, common in Anglo-Saxon language and used in OECD statistics, is adopted in this study. It focuses on the existence of several levels of government in a federal state.[47] Transfers between states on the one hand and between international or supranational institutions on the other hand must be distinguished from this and can be described as international transfers.

Both in economics and in the practice of national accounts transfers are seen primarily as an (intersectoral) instrument of transfer of services between different economic sectors and not with in an economic sector (intrasectoral). It follows that the objective of explanation is to analyse or present the reciprocal influence of the various economic sectors.The transfer of this knowledge to transfer relations with in a functionally similar sector is only possible to a limited extent in that a different explanatory objective has to be formulated. In the present case, it is a question of determining transfers as distribution instruments between public bud gets in the context of a comprehensive financial equalization. In the legal sciences, the concept of transfer is neither common or substantive, which is why the legal scholar is required to identify transfers with in the framework of financial equalization from the forms of the financial constitution and the financial equalization law as a special complementary way of distributing funds.

3.4.3. The economic concept of transfer is based on income transfers between persons or sectors, which do not change the amount of national income (income theory view) or increase the volume of economic goods (production theory view). Hence the objective of explaining the different modes of action of transfers on the one hand and exchange-related agreements on the other hand on national income and, as a distinguishing criterion, the gratuitousness or remuneration of the service relationships. An institutional distribution of income (property rights) is a prerequisite for both transfer and exchange relationships. Transfers can in principle be granted in monetary or real terms, directly or indirectly (non-benefit compensation) from income (or resource) owners. These four types make it possible to explain the transfer phenomena in both intersectoral and intrasectoral areas. However, the explanation of intra-governmental transfers raises the additional problem that is not typical of this sector of exchange-economy relations and therefore the delimitation of these intrasectoral transfers from exchange-economy operations is not in the foreground.[48] In the public sector, it is rather a question of delimiting compulsory transfers between the private and public sectors, taxes on transfers between households within the public sector. However, an exchange-economic analogy can be formed in the public sector in that services are exchanged for cost-sharing on a case-by-case basis between public budgets (intrasectoral cost rates).In the practice of national accounts, transfers are primarily understood as an intersectoral instrument for the transfer of services between different economic sectors. Although the principle of free travel is maintained, the delimitation of services for consideration and free of charge is carried out in a narrow market economy sense by means of the criterion of the purchase of goods (i.e. the statistical classification of goods). This means that national accounts within the public sector generally exclude an exchange-based analogy and consider cost rates between public sector budgets to be transfer payments. When specifying intrasectoral transfers, the national accounts are based on budgetary effectiveness. Only monetary benefits which permanently burden the paying budget and favour the receiving households should be classified as transfer payments. Indirect transfers are alien to national accounts. Since the objective of national accounts is to record transfers of resources between and within sectors, it is irrelevant to them whether intragovernmental transfers are made for the performance of external or own tasks. It is essential that a household’s decision to make free payments to another budget and the possibility of the receiving household having the amount within the framework of its own household economy.[49]

3.4.4. In contrast to the formal definition in national accounts, the legal analysis derives the transfer concept from foredetermined legal norms. Constitutional and simple legal standards can be used as a starting point. The above article assumes constitutional norms. If the principle of non-remuneration is to be maintained, Paragraph 2 of the Financial Constitution Act must be used to determine transfers as free transactions between local authorities. It stipulates that local authorities must in principle bear the costs incurred in the course of fulfilling their tasks themselves (cost-bearing rule). Performance of tasks financed by other non-competent local authorities or carried out for other local authorities responsible for this purpose (without remuneration) is given the character of intragovernamental transfers from the point of view of the financial constitution, in the first case direct monetary transfers, in the second case they are indirect real transfers. If this derivation of direct and indirect transfer relationships between local authorities is conclusive, it logically follows that there are cost estimates. Payments with the purpose of paying costs for the performance of tasks by another (non-competent) level or local authority must be classified as cost charges. When assessing what their or their own tasks are, the financial constitutional analysis must be based on the distribution of competences of the Federal Constitution.[50] As a separate task, those which fall within the jurisdiction of the Confederation or the Länder or within the independent sphere of activity of the municipalities, regardless of whether they are fulfilled by their own or foreign bodies, are to be understood as their own task. In principle, a simple legal approach would also be possible for tasks and thus transfer determination. If the tasks of a local authority are defined as all those obligations that are to be performed on the basis of a constitutional or federal obligation, the scope of transfer relationships is considerably reduced compared to the constitutional approach. Only those services of a local authority are to be classified as transfers, which are paid as discretionary expenditure.[51]

The consequence of a division of tasks between local authorities, which is based on simple statutory standards, is that the administrative tasks of the individual local authorities vary greatly depending on the national or federal regulations and are often subject to frequent legal changes over time. The consequence of this, in turn, is that transfers from country to country, between the federal government and the Länder, as well as between states and municipalities, must also be classified differently in their quality, quantity and over time. Development of an intra-governmental transfer concept for financial equalization purposes Delimitation of the public sector In order to be able to record transfers as intra-governmental phenomena of the public sector, a demarcation of the public sector is necessary. The public sector is understood as the sum of local authorities. The distribution of financial resources among the various local authorities is the subject of financial equalization in the strict sense. Functional self-governing bodies (parafiscal households) are excluded from the study. Municipal associations provide for the tasks of their own communities without financial autonomy. Financial transactions between municipal associations on the one hand and the Länder or the Confederation on the other, on the other hand, must therefore be dissolved on the members of the association. in statistics, however, this encounters difficulties because the transactions of the municipal associations are reported in aggregate and it is not possible to return them to the respective municipalities.

Major demarcation difficulties arise in the case of budgetary spin-offs in public (fund) and/or private organisational forms. Financial transactions to and from public funds are, in principle, intersectoral relationships. In cases where a public-legal fund is exclusively concerned with the tasks of the dispersed household, the financial transactions may be allocated to the aging budget. Financial transactions by local authorities with private law organizations leave the intrasectoral sector and are formally statically attributable to the intrasectoral sector. However, in so far as the activities of the operators organized by private law are substantively public tasks, the corresponding financial transactions must undoubtedly be included in an intersectoral analysis. For the classification and attribution of transfer relationships, it is then necessary to determine which local authority has the dominant decision-making power with regard to the execution and final jurisdiction under substantive law.[52]

3.4.5. In federally organized communities with multi-member statehood, intergovernmental transfer relations have a vertical and horizontal dimension. Vertical transfer relationships between territorial levels must be distinguished from horizontal transfers between local authorities within a political level. Horizontal transfer agreements are therefore only possible between countries on the one hand and between municipalities on the other.[53] the Austrian financial equalization system does not have any direct horizontal distribution arrangements. Horizontal financial equalization elements are only incorporated into the distribution of tax income shares in the municipal financial system (graduated population key, financial strength – financial needs compensation). if, however, direct horizontal compensation payments take place between municipalities or between countries, they have the character of cost-based payments which have the purpose of repaying benefits that go beyond a local authority (e.g. contributions from schooling to school-maintaining municipalities).[54]

Explanatory objective of an intra-governmental transfer concept for financial equalization. The distribution of funds in a federal state must be task-appropriate. It therefore presupposes standardization of the distribution of tasks between the levels of government (passive financial equalization). The assessment of the distribution of revenue and of the individual types of revenue allocated, in turn, in turn makes it more relevant to examine whether or to what extent this enables the various levels to carry out their tasks.[55] The Austrian Finance Constitution Act takes this idea into account in Section 2 (Cost-bearing Regulation). If this question is transferred to the vertical intragovernmental transfer system, the delimitation of transfer revenue from other revenue from a public budget can only have the purpose of showing the extent to which the given task of a territorial level must or can be used. The transfer concept derived from this is task-oriented and includes the objective of identifying payments (and services) that are used to finance (fulfillment) of issues issued by another local authority. For the purposes of fiscal equalization, this allows the following conclusions to be drawn: the ability of a local authority to finance its tasks with its own resources (financial capacity); Comparison of the financial performance of several levels; extent of local government benefits to other levels of local government. Comparison of benefits to other levels of local government between different levels (transfer balance); possible interdependence between local and receiving local authorities, Distribution of funds across the financial equalization system (vertical financial equilibrium – vertical financial imbalance). The objective of comparing financial performance also includes the inclusion of indirect transfers. If one political level takes over the fulfilment of tasks for another local authority without obtaining or receiving reimbursement of costs from the latter, there is an indirect transfer to the level responsible for the fulfilment of tasks. When considering intra-governmental transfer relationships in a task-oriented manner, it must be borne in mind that each local level can be not only a transfer recipient, but also a transfer guarantor. It is only from the formation of a net transfer balance that it becomes clear whether a level has more (surplus situation) or less (deficit situation) own budget than is necessary to carry out its own tasks.The existence of a surplus or deficit situation must not be combined with hasty assessments. The objectives and effects achieved through intra-governmental transfer relationships must be reserved for an in-depth analysis of the objectives and effects.[56]

3.5. The task-oriented concept of transfer developed for the purposes of financial equalization mentioned above is, of course, normative in nature. he draws his constructive explanatory material from the standardization and distribution of tasks in the state. If one relates the distribution of funds in the financial compensation to the respective intergovernmental division of tasks, where one will have to link to the constitutional distribution of tasks (usually the power of execution) in accordance with the interpretation of Section 2 F-VG (Cost-sharing rule). The division of the concept of transfer from a simply legally standardized division of tasks (and thus the division of responsibilities) means a departure from the constitutionally stipulated binding of the entire distribution of revenue in the financial equalization to the distribution of tasks. This would make it impossible to classify the concept of transfer into the entire revenue system of local authorities. If one wants to understand intra-governmental transfers as a (secondary) revenue method in the system of Austrian financial compensation, one will have to assume the given financial constitutional standards. In addition, therefore, a task-oriented transfer concept is assumed in accordance with the Financial Constitution Act. The normative task-oriented transfer concept derived here differs fundamentally from the fundamental definition of concept in national accounts. Since the aim of national accounts is to classify cash flows between and within the sectors according to their economic effects, the question of their own or external tasks is irrelevant to them. The exclusive criterion for determining intergovernmental transfers is the decision of one household level to make another payment without any consideration. From this point of view, cost rates within the public sector are transfers; indirect transfer payments do not exist in the national accounts.[57] This is ultimately also a consequence of the accounting of goods as public consumption or public investment in the specifying household; a further pursuit of this transaction towards a third budget affected is therefore unnecessary for the national accounts. The use of a normative concept of task for determining transfers must not obscure the disadvantages which result in the fact that normative system of distribution of tasks loses its meaning if they do not reflect economic and social development, but may even stand in the way of it. In these cases, legal regulations can only be staffing for matters that have long since obeyed other laws. The government’s objectives in financial equalization Financial equalization is legally understood as the regulation of financial relations between local authorities. The need for fiscal equalization is not necessarily limited to federally organized state hoods, but its economic effects and arrangements are discussed almost exclusively on the basis of a federally organized multi-stage state-building.[58] From the discussion about the non-economic, state-law justification of federal state forms of state can now be derived a state-law target system, which, although not able to legitimize the federal state as such, is based on it and is also inherent in the financial equalization through the active, task-related and passive, financial transformation of the federal program. Essentially, this state-law target system distinguishes between two dimensions:[59]The dimension of the division of violence: this was initially seen only as a horizontal division of force in legislation, administration and jurisprudence under state law. However, the distribution of these powers in federal state structures also leads to their vertical division between the levels of local authorities, thus making the individual state powers more differentiated and controllable. The dimension of citizen participation (subsidiarity): this is where the democratic-political consideration comes into play, according to which the will of the citizen to participate actively in the execution is the greater, but also seems all the more practical to execute, the smaller the region is conceived with its own decision-making powers.[60]

3.5.1. the economic target spectrum of fiscal equalization is recognized in the literature above all in the allocation efficiency of income redistribution and economic stabilization. The postulate of allocation efficiency requires, in the case of scarce resources, the best possible coordination of public services in terms of scope and structure to the needs (preferences) of citizens. For welfare-economic reasons, a monitorization in the determination of the supply of goods should be eliminated as far as possible and a supply of state services commensurate with regional and local needs should be achieved. The assignment of tasks to local or regional authorities is an optimization problem (choosing the optimal group size). The allocation problem essentially presupposes that local (regional) user groups with different preference structures exist and that supra-regional external effects can be internalized in contrast to the performance of the task at a higher level. The redistribution objective is discussed in two main directions in connection with fiscal equalization: on the one hand, the question arises as to whether the task of redistribution of income (interpersonal redistribution) should be assigned to the supra-regional headquarters or to the regional, decentralized bodies: on the other hand, it is checked in a horizontal perspective whether and to what extent differences in the budget and in the supply of individual sub-regions should be accepted (intra-governmental redistribution). According to the prevailing view in the federalist state, the stabilization objective is only achieved by the greatest possible centralization. An orientation towards the stability objective therefore suggests either coordinating economic policy in the state (which entails the cost of coordination) or assigning the revenue sovereignty from high-income taxes to the central government and those from uncountable levies to the regions.[61]Financial strength and its impact on the financial equalization target system. On the basis of the target functions of the financial equalization, it will now be examined what functions financial strength has in this target system. The following discussion assumes a general linguistic concept of financial strength. The implementation of the target system of state law depends on the distribution of financial strength between local authorities. In other words, the distribution of financial power gives its content to the target system of state law: The more vertical autonomous divisions of tasks are guaranteed by financial revenue-based autonomy, the more a matter of secondary authorities is the role of a power limitation function in the sense of the vertical separation of powers. The distribution of financial power is thus a measure of vertical distribution of powers/violent financial power). in this context, the significance of financial strength is based less on a quantitative view than on a qualitative one: the financial power that divides the force is financial power from its own tax sources. On the other hand, the allocation of full income sovereignty already constitutes a qualitatively strong weakening of financial strength if the local authority does not at the same time have material competence to participate in legislative sovereignty. The passive position of the recipient of the profit shares limits the decision on desirable self-selected tasks.[62]Vergable considerations apply to the aspect of civic participation. It can be assumed that the relationship between responsibility and revenue-raising in the subordinate local authorities is only transparent to the citizen if the local authority responsible for the task is at the same time the one which creates and collects the taxes for these levies. Full transparency is ultimately guaranteed only in the separation system and is lost with the advance of the tax interconnection, insofar as the revenue network is not an expression of an interdependence of integrated task programs. However, this transparency is a prerequisite for the efficiency of citizen participation. the distribution of financial strength in the sense of revenue from own levies thus indicates the efficiency of citizen participation.

The economic target system is also ultimately determined by the distribution of financial strength: if allocation efficiency is discussed in writing primarily from the point of view of the distribution of tasks, the mechanism for achieving an efficient supply also places special demands on the responsibility for expenditure. If we want to ensure that the size and structure of the regional offer are based on the preferences of the regional user group, it would make sense to require that the person offering the services should also be responsible for the associated expenditure. maximum efficiency occurs when the users of the services offered are also payers. The identity of beneficiaries and payers prevents the provision of services for which there is no demand and the non-demand services from being offered through political regulatory mechanisms. From an allocation policy point of view, it is therefore inferred that, in principle, the right or the obligation to finance should lie with the region that decides on the offer. In this systematic interaction, financial strength indicates the ability of a local authority to finance its own tasks in an allocative efficient manner. Maximum efficiency is achievable when financing from own levies.[63] Shares of income in taxes without legislative sovereignty, on the other hand, indicate an allocatively weakened financial strength. although the provider still has to take political responsibility for its allocation decision before the potential user group, the provider’s expenses and disadvantages are not immediately verifiable for the user group.

Transfers must be assessed in a fictitious manner from an allocation theory point of view: insofar as they are allocated exclusively on the basis of meritorious assessments of the granting local authority with conditions of use, they do not constitute an allocative financial force, separate from regional user preferences; however, with the appropriate preferential structure of the receiving local authority, there is an increase in allocative financial strength in terms of non-conditional resources due to the take-up effects. Allocations without conditions of use lead to a financial strength comparable to the yield shares. Financial allocations for services produced on behalf of another local authority are not to be taken into account as financial strength in theory, since they are granted to finance a foreign task.[64]

4. Emmanuel Macron and Angela Merkel scored a major political victory on Wednesday. the European Commission’s proposal to create a reconstruction fund to overcome the corona recession is exactly what the French President and the German Chancellor have in mind. EUR 500 billion in transfers is to be made over the next three years. This represents around 1.2% of the Union’s total annual economic output. In addition, EUR 250 billion in loans, which are managed through the European Investment Bank and passed on to companies as guarantees. The Commission would issue bonds on the financial markets to fill the fund. Commission President Ursula Van der Leyen called this in her debate with the European Parliament that this was an urgent and extra-woven need for an urgent and extra-woven situation. According to the Commission, tourism in the non-profit sector, the creative industries and culture could suffer a drop in sales of more than 70 percent in the current second quarter alone.[65] The textile s, transport, energy-intensive industries and the energy sector would also be hit hard. By contrast, sectors with higher consumer confidence, such as manufacturing, retail, or healthcare, would likely return faster. The Commission hopes to close at least part of the huge investment gap that the pandemic has ripped. In 2021 and 2022 alone, at least €1.5 trillion in additional public and private investment would be needed to put Europe on the path to sustainable recovery. The Commission proposes 30-year bonds repaid from the Union budget: not before 2028, and not after 2058. This is the first problem with the plan, which is called the Next Generation EU. After all, 2028 is the beginning of the next financial period. And the negotiations for the next one (2021 to 2027) are already tough. The Union is in danger of getting into an even greater dispute over money in the future than it has been in the past. In addition to the already controversial budget items, one would also have to make provision for the repayment of the bonds. The Commission is aware that an increase in membership fees is tricky. It therefore proposes four new sources of money: a part of the revenue from the emissions trading, a levy on imports from states that have less stringent climate protection targets, a digital tax and a single market levy for large companies. This is where the next pitfall lurks. After all, the revenue from CO2 trading is already included in the national budgets. Von der Leyen spoke of a kind of surcharge. the digital tax, on the other hand, has been stuck with finance ministers for just over two years. The carbon tax would exacerbate trade conflicts with China and the US. And whether finance ministers agree to a new corporate tax in the midst of the biggest recession since 1929 is questionable. The question arises as to which countries will benefit most from these transfers. First and foremost Italy and Spain. Almost a third is reserved for them. Poland would receive about as much as France, Austria would receive just over four billion euros. However, it would be necessary to deduct future membership fees and add up other inflows. They must be dealt with seriously. In order to do this, we must take into the view of the thrifty Vie , such as the Netherlands, Austria, Sweden and Denmark. The Dutch prime minister, Mark Rutte, was far tamer on Wednesday than he was last. He had spoken to Italy’s head of government, Giuseppe Conte, whose reform plans were in the making, and for a strong EU we need strong member states>>. Chancellor Kurz also expressed himself more conciliatory: “I expect that the proposals of the EU Commission will also take into account the ideas of the thrifty four.>> A, 19 June, the Heads of State and Government will debate this for the first time. The path around the four: the discounts on their membership fees. The proposal of the EU commission on corona reconstruction to tap new sources of money could fix the rift between Germany and Italy. As paradoxical as it sounds, the pandemic, which, with the exception of the research stations on the North- South Pole, has not left a patch of the earth, offers the opportunity to rebuild the EU, which has been in a state of disarray for more than ten years. Why? Because there won’t be a return to day-to-day business anytime soon – if at all. because the epidemic is driving this already ailing day-to-day business straight into insolvency. Since the US financial crisis spread to Europe in the autumn of 2008, we know that the introduction of the euro has not compensated for structural imbalances within the monetary union, but has exacerbated them in the opposite direction. Today, Germany and Italy are not only Austria and the Alps, but fiscal galaxies. Thanks to permanent repair work and the courageous intervention of the European central bank, Euroland has been stabilized halfway. However, we are still light years away from a sustainable balance between north and south.[66]Corona has shown how inadequate all these repairs have been in the end. Debt remains debt- no matter how nicely packaged and how well you cover it up. it is, above all, the Italian public debt, which has reached a level that threatens the existence of the eurozone. Italy is too big to be caught, even this truism has become topical again through Corona. Does this mean that the Union must combine its savings in order to absorb the south? Not. The plague has confused many old certainties, but the old principle of no taxation without representation is still valid. It cannot be that Austrian tax money is managed in another capital of the Union. Those who define solidarity in this way obviously did not understand how democratic responsibility works. So much for the crisis. But where is the chance?[67] it is hidden in yesterday’s proposal from the EUROPEAN Commission. The idea of recovering the costs of post-corona reconstruction, at least in part, through European funding, is, firstly, a one-off, a move in the right direction and, secondly, shared by many governments – including, incidentally, the Austrian one. In a sum, such levies (provided they are clearly defined and strictly limited) could be compared with a kilometer-based toll of European policy. The ideas range from a plastic recycling tax to a digital tax to CO2 import duties. Cleverly constructed, such sources of revenue would have at least three advantages. first, they would be an elegant way out of the old north-south conflict, which is about austerity versus furiousness, and which is eating up the eurozone from within. The dispute over the EU, which has become more vehement since Britain’s exit, could also be defused. And it would be too good to legitimize the raising of funds thanks to its embedding within the triangle Of the Commission – Council- European Parliament.

For too long, the EU reform debate has been conducted in an overly moralizing tone. But Corona makes no distinction between the supposedly brave and the supposedly evil ones. Europe’s response to the challenge of the disease must not make this difference either. A third of the money for Italy and Spain. Commission internal calculations show that about 32 percent of the transfers from the new fund would go to the two Mediterranean countries. The mediation of the distribution struggle between Eastern and South-Eastern Europe will require delicate concessions. According to an internal table of the European Commission, it is clear who should benefit to what extent from the direct payments from the new EU Reconstruction Fund, which was presented by the President of the Commission, Ursula von der Leyen, on Wednesday. Italy and Spain are to receive the lion’s share: 81.8 billion euros went to Rome, 77.3 billion euros to Madrid. Together, this represents around 32 percent of the EUR 500 billion by which the Union’s next financial framework for the years 2021 to 2027 is to be increased , and which is to be spent primarily in the first three years.[68]This is followed by France with EUR 38.8 billion and Poland with EUR 37.7 billion. The large Polish sum may come as a surprise, as the country came through the pandemic rather gloomyly. But the Polish economy is extremely dependent on its integration into the internal market – and especially on German industry. In addition, it grew faster than others. as a result, the year-on-year decline in the economy was also more severe than where growth was already anemic before the crisis. Poland is followed by Germany with 28.8 billion euros, Greece with 22.6 billion euros and Portugal with 15.5 billion euros. Austria would receive EUR 4.043 billion in transfers from this fund. All these figures will be officially presented by the Commission. The  calculations began in the state law firms of the Member States as to who pays or gets out of the European project in net terms, how much in the years 2021 to 2027. You have to include the membership fees, the discounts on them, as well as expected returns from Brussels in the calculation.[69] The struggle for distribution between East and Southern Europe for agricultural and regional pots, which has been simmering since the wave of enlargement in 2004/2007, is now likely to intensify. After all, a good part of the new transfers is intended to temporarily grease these two and other existing budget items in the Union budget. The southern Europeans will be even more wary that the Eastern Europeans do not dig up the funds for them. And in the East, it is not unjustifiably argued that enormous and shameful reforms have been carried out in order to get fit for EU membership, and that they are now suffering fewer victims of the pandemic, but also serious economic damage. Hungary, Romania and Bulgaria have experienced some of the highest recessions since the beginning of the year. The rule of law negotiation path. One of the cards that Eastern Europeans will put on the table is how respect for the rule of law is linked to the receipt of subsidies, one of the conditions for EU membership. The Commission has proposed that funds be frozen if the gagging of free justice or the politicization of the administration affects the correct handling of these funds. In the Council, in the case of the governments, this is a question: should such a Commission recommendation only be stopped by qualified majority (which Hungary, Poland, the Czech Republic reject) – or should it need such a heavy majority to confirm it (against almost all other states). The solution could be a fiscal union for the time of the crisis. We are in the most serious economic crisis of the Second World War. some Member States are significantly more affected than others – without their own guilt. the European Commission is proposing an ambitious reconstruction plan so that, after corona, we do not get back on our feet as the last continent, but as one of the first. We have been working on the proposal for a month and we assume that it is grosso modo consensual. The decision was already made by EU leaders at the end of April, when the Commission was mandated to link the planned instrument of reconstruction with the EU budget. There is now a consensus on this – in this crisis we do not want to create a new institution such as the ESM, but use the EU’s tried and tested budget framework. The EU Commission will therefore issue large-volume bonds for the first time – there is consensus among Member States on this. On the whole, it is also possible to agree that we want to use most of these funds as grants – although the mix in the Council is still being discussed.[70]  The Commission proposes to provide the reconstruction instrument with EUR 750 billion. two thirds will be awarded in the form of grants, and a third in the form of loans. What we can be pleased about, however, is the fact that we are now able to achieve a reform in such difficult times that we would not have been able to achieve under normal circumstances: economic and monetary union will be supplemented by a fiscal union for the time of the crisis. So far, the European Central Bank has only been able to buy national bonds, but not European bonds as such. the planned innovation will also make Europe more attractive to financial markets. if we issue bonds jointly and on a large scale in the financial markets, then these are safe securities that can be bought from London to Singapore. This gives Europe security and importance. Our internal market has so far lacked such a secure security, which all EU members are behind. It is more expensive to pay national money into the ESM or the EU budget than to raise the funds together in the financial markets.[71] This fiscal union should be turned into a permanent institution.In the absence of access to financial markets for the Member States of the European Monetary Union, the instruments of the European Stability Mechanism (ESM) are available. These were created to prevent the euro area from getting into another sovereign debt crisis and are immediately available. The ESM was created as a fiscal instrument to ensure the indebtedness of Member States in a crisis. The Community of Member States, in particular those Member States with greater fiscal room for manoeuvre, guarantees the ESM’s borrowing.[72] The ESM has at its disposal various instruments which can be used subject to conditions at the request of an ESM member (JG 2017 paragraphs 122 e.g.). Precautionary grants may take the form of primary market refueling of government bonds or loans where the country’s economic situation is stable and refinancing through the financial market is possible. If an ESM Member State fulfils several criteria, for example in relation to public debt, deficit limits and a stable banking system, the Precautionary Conditioned Credit Line (PCCL) is available to it. If the economic situation is stable but these criteria are partially not met, the Enhanced Conditions Credit Line (ECCL) is eligible with the obligation to strive to meet these criteria. In both cases, there is an enhanced monitoring of the country’s economic and financial situation. One should only spend the money you really need. The Corona crisis has significantly increased the EU’s financial needs. Over the next two to three years, we will need an additional EUR 1 trillion at European level to combat the consequences of the pandemic. In order to be able to cope with this, we need a temporary expansion of our overall framework. This is necessary for this time, but no more after that. In this context, the financial burden could be shifted somewhat – away from national contributions to European own resources, such as a plastic tax. It is true that the Commission’s proposal paves the way for greater financing of the EU through own resources in the longer term. The entry into own resources also makes sense because we want to refinance the corona-related expenditure in the longer term – i.e. beyond the next budget framework 2021 -2017. the extent to which these own resources can be absorbed depends on the will of the Member States. In the United States, factor incomes, but also government transfers to and between states play a greater role than in the euro area (Asdrubali and Kim, 2004). The results for other federal states are mixed, but mainly point to a larger role of the savings or factor income channel (see the table in field et al., 2018). After all, financial markets would provide less risk-sharing in times of crisis – especially when it is most needed. This would mean more fiscal transfers in the euro area (Berger et al., 2018). Proponents expect that[73], together with a more advanced banking union, they would make it easier for states to enact fiscal rules. The Member States of EMU show large differences in average per capita income. This also applies to the extent of domestic redistribution between households with higher and low incomes through the national tax and transfer system. Political support for a substantial redistribution of income between Member States is at least not yet available. Existing proposals for a fiscal capacity therefore mostly seek to achieve a insurance function.[74] Only temporary intergovernmental transfers are to be made available, so that there will be no permanent net transfers. Moreover, no Member State should be able to expect a transfer ex ante. Fiscal capacity at European level should therefore be fundamentally different from transfer mechanisms such as the German land-based fiscal equalization, with which a systematic and long-term redistribution is explicitly intended (Jg 2014 paragraphs 606 ff.). For this reason, the proposals rely in part on ex ante conditionality (Arnold et al., 2018). This approach is often adopted in private insurance solutions that want to avoid moral hazard. A theoretically ideal solution would be to make transfers dependent on the realization of an asymmetric shock (Persson and Tabellini, 1996a). However, since shocks are unobservable and difficult to appreciate, this is not feasible. Ex ante conditionality would instead make transfers from fiscal capacity conditional. This includes, for example, compliance with European fiscal rules, as demanded by the proposals of the European Commission (2018) or Bénassy-Quéré et al. (2018). Moreover, a deductible could be introduced for states in order to reduce the misincentives from fiscal capacity. Fiscal capacity then takes the form of reinsurance.[75]The financial considerations have led to the fact that a valid operationalization of financial strength is only possible with a view to a concrete financial constitutional system and concrete financial lending targets. This means that in order to provide a new financial tax to the European Union, an amendment of the Lisbon treaty is required where the Member States renounce on a part of their tax sovereignty in favor of the European Union.


Antonio Felice Uricchio is Full Professor of tax law at University of Bari Aldo Moro        

Filippo Luigi Giambrone is  PhD – student in ‘Diritti, economie e culture del Mediterraneo’ at University of Bari Aldo Moro

[1] Although this article is the result of a joint reflection of the authors, paragraph 1 and its subparagraphs are edited jointly by Antonio Felice Uricchio and Filippo Luigi Giambrone, paragraph 2 and its subparagraphs are edited by Antonio Felice Uricchio, paragraph 3 and its subparagraphs are edited by Filippo Luigi Giambrone, paragraph 4 is edited jointly by Antonio Felice Uricchio and Filippo Luigi Giambrone.

[2] COM(2020) 456.

[3] SWD (2020) 98.

[4] COM (2020) 442 final.

[5] Entschließung des Europäischen Parlaments vom 17. April 2020 zu abgestimmten Maßnahmen der EU zur Bekämpfung der COVID‐ 19-Pandemie und ihrer Folgen, bekräftigt durch die Entschließung des Europäischen Parlaments vom 15. Mai 2020 zu dem neuen mehrjährigen Finanzrahmen, den Eigenmitteln und dem Aufbauplan.

[6] Conclusions of the President of the European Council following the video conference of the Members of the European Council, 23 April 2020.

[7] COM (2020) 442 final.

[8] COM(2020) 22, COM(2020) 23.

[9] COM (2020) 442 final.

[10] Europäische Kommission, Proposal for a regulation of the European Parliament and of the Council on the establishment of a European Investment Stabilisation Function, COM(2018) 387 final, Brüssel, 31. Mai.

[11] For more references, A. Mangia, L’Europa e il Trattato impossibile, ed. e-book, Morcelliana; A. Mangia, Del Mes, delle sue condizionalità e delle discipline in deroga. Cosa succede quando il diritto d’impresa viene applicato ai rapporti intergovernativi, in; G. Gitti, Perché il Mes anti-Covid non è ancora al riparo del fuoco della Corte di Kalsruhe, in Milano Finanza, 13 maggio 2020; un cenno anche in Cottarelli, Moavero, Europa. Le tre verità sul MesRepubblica, 27 aprile 2020.

[12] A. Villafranca, Mes: com’è e come funziona,, 26 marzo 2020.

[13] J. Südekum,  et al., Europa muss jetzt finanziell zusammenstehen, ell/wirtschaft/corona-pandemie-gastbeitrag-europa-muss-jetzt-finanziell-zusammenstehen- 16688858.html, abgerufen am 21.3.2020.

[14] For a deeper analysis A. Cascavilla, G. Galli, Il Mes: cos’è e come potrebbe essere utilizzato nell’attuale emergenza, in OCPI, 26 marzo 2020).

[15] C. Stagnaro, L. Fava, Il Mes ci conviene: l’Italia ha 6 miliardi di ragioni per prenderlo, Il Foglio, 12 maggio 2020

[16] STMWi Bayern , Soforthilfe Corona, Bayerisches Staatsministerium für Wirtschaft, Landesentwicklung und Energie,, abgerufen am 22.3.2020.

[17] S. Weiske, Die Folgen der Industrieschwäche für die Binnenwirtschaft, Arbeitspapier 2020, Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, Wiesbaden, im Erscheinen.

[18] Europäische Kommission, Coronavirus crisis: “Commission will use all the tools at its disposal to make sure the European economy weathers the storm”, Pressemitteilung IP/20/440, Brüssel, 10. März, 2020.

[19] EZB, Geldpolitische Beschlüsse, Pressemitteilung, Europäische Zentralbank, Frankfurt am Main, 12. März 2020.

[20] R. Elsas – S. Mielert, Unternehmenskrisen und der Wirtschaftsfonds Deutschland, Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung 62 (61), 18–37.

[21] A. Mangia, Op.cit.

[22] Rat der Europäischen Union, Council decision authorising the opening of negotiations with the United Kingdom of Great Britain and Northern Ireland for a new partnership agreement, 13. Februar 2020 b.

[23] RKI, COVID-19: Jetzt handeln, vorausschauend planen, Epidemiologisches Bulletin 12/2020, Robert Koch-Institut, Berlin, 3–6 (2020b).

[24] EZB, Open market operations, Europäische Zentralbank, plement/omo/html/index.en.html, abgerufen am 21.3.2020.

[25] Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, Die gesamtwirtschaftliche Lage angesichts der Corona Pandemie, 22. März 2020.

[26] A. Mangia, cit.

[27] BMWi, Entwicklung der Produktion im Produzierenden Gewerbe im Berichtsmonat Januar 2020, Pressemitteilung, Bundesministerium für Wirtschaft und Energie, Berlin, 9. März, 2020.

[28] BMVg, Corona-Pandemie: Bundeswehr beschafft medizinisches Material im großen Stil, Bundesministerium der Verteidigung, schafft-medizinisches-material-224904, abgerufen am 18.3.2020.

[29]R. Döhrn, Auswirkungen der COVID-19 Epidemie auf die chinesische Wirtschaft – eine erste Abschätzung, RWI Materialien 134, RWI – Leibniz-Institut für Wirtschaftsforschung, Essen, 2020.

[30] Europäische Kommission, COVID-19: EU-Kommission präsentiert EU-weit koordinierte Maßnahmen, Pressemitteilung IP/20/459, Brüssel, 13. März, 2020.

[31]  A reconnaisance in S. Cassese, Il guinzaglio tedescoIl Foglio, 19 maggio 2020.

[32] Ch.Smekal – E.Theurl, Finanzkraft und Finanzbedarf von Gebietskörperschaften. Analysen und Vorschläge zum Gemeindefinanzausgleich in Österreich, Böhlau, 1990, 21 ff.

[33] Vgl. beispielsweise M. Gantner – E. Theurl, Finanzkraft und Finanzbedarf, in, Das öffentliche Haushaltswesen in Österreich (ÖHW), 1977, 1ff; M. Gantner, Überlegungen zu den Begriffen Finanzkraft und Finanzbedarf im FAG 1973, , E. Matzner, Öffentliche Aufgaben und Finanzausgleich, Wien, 1977, 316 ff.

[34] Ch. Smekal, Operationalisierung eines intragovernmentalen Transferbegriffs, in, Matzner, (zit. Anm.2), 414 ff.

[35] D.Bös, Ökonomische Kriterien und Aufteilungsschlüssel im horizontalen Finanzausgleich, in, Zeitschrift für Nationalökonomie 1970, S. 370 ff; J.Popitz, Der künftige Finanzausgleich zwischen Reich, Ländern und Gemeinden, Berlin, 1932, S. 204 ff.

[36] Confront, for example, the critical position of Popitz, Op.cit., S.  204 ff; vgl. weiters Metz, Der Ausgleich von Finanzkraft- und Bedarfsunterschieden im föderalistischen Staat, Frankfurt/Main 1979, S. 33 ff.

[37] Ch.Smekal – E.Theurl, Op.cit., S. 23 ff.

[38] Vgl. R. Musgrave, Approaches to a fiscal Theory of Political Federalism, Princeton 1961, S. 97 ff (99).

[39] Ch.Smekal – E.Theurl, Op.cit., S. 25 ff.

[40] D.Bös, Ökonomische Kriterien und Aufteilungsschlüssel im horizontalen Finanzausgleich, in, Zeitschrift für Nationalökonomie 1970, S. 370 ff; J.Popitz, Der künftige Finanzausgleich zwischen Reich, Ländern und Gemeinden, Berlin, 1932, S. 204 ff.

[41] Musgrave, Op.cit., 97 ff.

[42] With regard of the fees compare Metz, Op.cit., 82 ff, according to which fees for the use of municipal facilities do not count towards financial strength, since their calculation bases are also expenditure items; contrary view Advisory Commission on Intragovernmental Relations (ACIR), Measures of State and Local Fiscal Capacity and Tax Effort, a Staff Report, Washington, D.C., 1962, p. 13 ff.

[43] Ch.Smekal – E.Theurl, Op.cit., S. 25 ff.

[44] Ch. Smekal, Operationalisierung eines intragovernmentalen Transferbegriffes, in, Matzner, Öffentliche Aufgaben und Finanzausgleich, Wien 1977, 316 ff.

[45] J. Grand – A. Reschovsky, Concerning the appropriate Formulae for achieving horizontal Equity through federal Revenue Sharing, in, National Tax Journal, Bd. 24, 1971, 476.

[46] Compare D.Clark – Federal- Provincial Relations. The Problems of fiscal adjustment, in, Canadian Tax Journal

[47] BMVg, Corona-Pandemie: Bundeswehr beschafft medizinisches Material im großen Stil, Bundesministerium der Verteidigung, schafft-medizinisches-material-224904, abgerufen am 18.3.2020.

[48] Ch. Smekal, Operationalisierung eines intragovernmentalen Transferbegriffes, in, Matzner, Öffentliche Aufgaben und Finanzausgleich, Wien 1977, S. 411 ff.

[49] Ch. Smekal- G. Kirsch – H. Zimmermann, Beiträge zu ökonomischen Problemen des Föderalismus, 1987.

[50] Ch.Smekal – E.Theurl, Op.cit., S. 26 ff.

[51] So Verbindungsstelle der Bundesländer beim Amt der Niederösterreichischen Landesregierung, GZ – VST-3/40-1975 sowie Aktenvermerk vom 12. Februar 1976.

[52] Feld, L.P. – S. Osterloh, Is a fiscal capacity really necessary to complete EMU?, Freiburger Diskussionspapiere zur Ordnungsökonomik 13/5, Walter Eucken Institut, Freiburg.

[53] Ch. Smekal, Op.cit, 38 ff.

[54] Sowohl die ökonomische Analyse als auch die VGR – Praxis berücksichtigen horizontale Transfers zwischen Gebietskörperschaften.

[55] Ch. Smekal, Operationalisierung eines intragovernmentalen Transferbegriffes, in, Matzner, Öffentliche Aufgaben und Finanzausgleich, Wien 1977, S. 411 ff.

[56] Ch.Smekal – E.Theurl, Op.cit., S. 27 ff.

[57] D. Furceri – A. Zdzienicka, The euro area crisis: need for a supranational fiscal risk sharing mechanism?, Open Economies Review 26 (4), 2015,  683–710.

[58] H. Zimmermann, Allgemeine Probleme und Methoden des Finanzausgleichs, In, Neumark, Op.cit., 9.

[59] R. Pfaundler, Der Finanzausgleich in Österreich, Wien, 1931, 3 ff.

[60] B. J. Cowling – L.M. Ho –  G.M. Leung, Effectiveness of control measures during the SARS epidemic in Beijing: A comparison of the Rt curve and the epidemic curve, Epidemiology and Infection, 2008, 136 (4), 562–566.

[61] Zimmermann, Op.cit., p. 11ff; E. Thöni, Ökonomische Theorie des Föderalismus, in, Matzner, Op.cit, p. 23 ff; Ruppe, Op.cit., p. 78 ff.

[62] Ch.Smekal – E.Theurl, Finanzkraft und Finanzbedarf von Gebietskörperschaften. Analysen und Vorschläge zum Gemeindefinanzausgleich in Österreich, Böhlau, 1990, 21 ff.

[63] Deutscher Bundestag, Kurzmeldungen „heute im Bundestag“, Bahngeschäft leidet unter Corona- Krise, Kurzmeldung hib 283/2020, Berlin, 11. März.

[64] Ch.Smekal – E.Theurl, Finanzkraft und Finanzbedarf von Gebietskörperschaften. Analysen und Vorschläge zum Gemeindefinanzausgleich in Österreich, Böhlau, 1990, 32 ff.

[65] O.Grimm, Kommissionspräsidentin von der Leyen folgt dem Vorschlag von Macron und Merkel und fordert eine halbe Billion Euro an Transfers gegen die Coronazession, Die Presse, 2020.

[66] M. Laczynski, Ein eleganter Ausweg aus dem Nord- Süd- Konflikt, Die Presse, 2020.

[67] Deutsche Bundesbank, Finanzstabilitätsbericht 2019, Frankfurt am Main.

[68] O. Grimm Ein Drittel des Geldes für Italien und Spanien, Die Presse, 2020.

[69] A. Kühnlenz, Konjunktur: Deutschland könnte Europa in die Rezession stürzen, aktualisierte Version vom 13. März 2020:

[70] OECD,  Tackling the coronavirus (COVID-19) crisis together: OECD policy contributions for coor- dinated action, Organisation für wirtschaftliche Zusammenarbeit und Entwicklung,, abgerufen am 23.3.2020.

[71] M. Laczynski, Eine Fiskalunion für die Zeit der Krise, Die Presse, 2020.

[72] Südekum, J. et al.,Europa muss jetzt finanziell zusammenstehen, ell/wirtschaft/corona-pandemie-gastbeitrag-europa-muss-jetzt-finanziell-zusammenstehen- 16688858.html, abgerufen am 21.3.2020.

[73] Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, Die gesamtwirtschaftliche Lage angesichts der Corona Pandemie, 22. März 2020.

[74] WHO, Coronavirus disease 2019 (COVID-19), Situation Report 61, Weltgesundheitsorganisation, Genf, 21. März 2020.

[75] Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, Die gesamtwirtschaftliche Lage angesichts der Corona Pandemie, 22. März 2020.

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