This strategy should increase the flexibility of, and lower the adjustment costs for, European firms and workers confronted with globalisation. Improving competitiveness is the main condition for making globalisation a success for the citizens of Europe. As for fiscal policies, in the global economy, capital and labour mobility puts pressure on tax bases.
Rather than a “race to the bottom”, with only tax rates reduced, we begin to see tax reforms that make a country more “competitive” and more attractive for investment and human capital. On the expenditure side, the influence of globalisation appears to be more limited. We should expect a tendency towards smaller but more efficient budgets, with “higher-quality” public spending.