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Incentives. For What, To Whom?

I noticed with some delay the communiqué by EU ECOFIN meeting, EU’s 27 economy and finance ministers – which decided to give “further incentive” (so goes the title) to Hungary:

“…. EU’s economy and finance ministers adopted a new recommendation asking Hungary to implement consolidation measures within the next six months that will bring their deficit below 3 per cent of GDP in 2012 and decided to suspend commitments from the Cohesion Fund for Hungary as of 1 January 2013. The ministers’ will revisit the case again at their meeting on 22 June and if the Council decides at that meeting or later that Hungary has taken the necessary corrective action they will lift the suspension without delay. The suspension does not apply to funds granted for already running projects – only for projects which are yet to be effectuated.”

I am aware that Hungary is currently considered the black sheep of the European Union. I thus understand a bit more tolerantly why such harsh treatment with respect to Hungary that, ceteris paribus, would never be adopted against other countries that were to run a similar deficit to GDP.

But just a bit. I resent that Europe motivates the cancellation of important funds that supposedly go the population and industries of Hungary with the failure to reach an accounting goal that has no economic sense, has even lower sense in a recession, and for which no other country has been punished before (and will not be in the future). How can you explain this to Hungarian citizens?

One last thing. About semantics. We have been leaving for many years under the idea that “incentive” (coming from the Latin incentivum, music for soldiers to act more excitedly and fight better; incinere being related to the act of singing) was something to reward. Indeed it went so far to go too far, with all the wasted subsidies that went on in Europe for years.

No more.

Now, in a game-theoretic slang, we have shifted from “promises” to “threats”. Incentives are not anymore swift gifts but harsh punishments. One could argue that there is a still a promise in the incentive given to Hungarians since we are telling them “oh, if you go back to behave well, we’ll give you back the ice-cream”. The difference? We are not dealing with ice-creams but with huge amount of resources, we are not dealing with spoiled kids but with hard-working and certainly not rich grown-up workers or unemployed people.

When politicians loose touch with citizens and their real problems, when they enter the realm of absurd economic models of reality, that is when we put at risk the fabric of society. We did not elect University Professors, we did elect Politicians. Better give them incentives to understand that. We have the tools, called elections. Let us make it clear to them we could use them.

One comment

  1. georges dalle

    23/03/2012 @ 16:31

    I really think that the professors that are running italian governement are very bad and inefficient (infact they were the same that tought to what we call “classe dirigente” that send Italy bankrupt)


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