German grumbles about fiscal transfers between states can be seen as the eurozone crisis in miniature. Wealthy Bavaria resents paying for feckless Berlin, and never mind the unfortunate history that led to the divergent fortunes of the regions.
And if tax transfers are a controversial topic within one country with a common language and culture, what are the chances of ever building a sustainable fiscal union across Europe?
But tax transfers are just one half of the trade. The free movement of people is the other side.
From the fall of the Berlin Wall, workers from the former East Germany naturally flooded to West Germany to grab their chance at prosperity — and their hard work and ambition undoubtedly helped further fuel the success of the western states.
Much the same is true of the great European Union expansion of 2004. For example, for all the weasel words of troublemakers like the UK Independence Party, the UK’s economy benefited far more from allowing the influx of hard working, entrepreneurial people from central and eastern Europe than it suffered from the associated costs — as cold, hard data has shown time and time again.
This is nowhere better demonstrated than in the City of London. Other populist politicians like the mayor of London Boris Johnson might complain about how the capital (and the south-east of England) subsidises the rest of the UK with cash, but what about how much the rest of the UK subsidises London with people?
Take a trip through the bars of the City and Canary Wharf and you’ll hear just as many accents from the north of England, Northern Ireland, Scotland and Wales as you will from London or the Home Counties.
And this is true of places further afield — some 17% of London-based finance professionals come from EU countries, according to recruitment website efinancialcareers.com (incidentally, three of the top four donor countries are in peripheral Europe and there are more Greeks than Germans).
Remarkably, the political party that is traditionally the biggest supporter of the City — the Conservatives — have promised an in/out referendum on the UK’s membership of the EU if it is re-elected at the UK general election in May. This could cut the annual payment into EU coffers, but also threatens to cut off the supply of skilled multilingual workers on which the City depends.
In this together
Perhaps much of this divisive talk would be stifled if wealth distribution was relabelled as payment for a supply of people. Would London be quite so rich if it didn’t have Mancunians manning its trading floors and Brummies bustling over its Bloomberg terminals?
The free movement of people across Europe has far more benefits than drawbacks. But one drawback is a brain drain from countries with fewer opportunities. As richer economies benefit from taking in the best and brightest from poorer areas — which, don’t forget, paid for the education of these bright young things — skimming off some of that wealth to help support supplier countries is not only morally right, it also makes sense to ensure that the supply line does not dry up.
And it would also stifle support for populist parties.
A melting pot of nationalities, with different types of education and cultural experiences, leads to fresh approaches and innovative ways of thinking. That is by far the best mix to ensure prosperity.
But it does not work without tax transfers as well. London’s capital market set-up is a perfect display of the benefits of integration, but Europe's politicians would do well to remember that its revenue-creating magic comes with a cost.