It’s clear that European policymakers are bumbling around, mainly because they don’t want to do the only steps that would actually work to end the crisis. Martin Feldstein, the conservative economist, basically gets this right in an op-ed today. It’s not a debt crisis, it’s a banking crisis. And in a larger sense, it’s a euro crisis. “The euro itself is a machine for perpetual destruction,” as Ambrose Evans-Pritchard writes.
So you can excuse me for thinking that nothing good will come of this entire sorry spectacle. However, that may be the wrong analysis, if this financial transaction tax comes off.
The European Union proposed a financial-transactions tax that would take effect in 2014 and raise about 57 billion euros ($78 billion) a year, prompting renewed opposition from the U.K.
The proposal would apply a tax of 0.1 percent on trading of stocks and bonds, with a 0.01 percent rate for derivatives contracts, the European Commission, the EU executive, said today in Brussels. Those minimum rates would apply throughout the 27- nation bloc. The measure would deliver “a fair contribution from the financial sector,” EU Tax Commissioner Algirdas Semeta said.
European governments are split over the merits of a transactions tax, while British banks warn that an EU-only measure would drive business to other regions. The U.K., home to Europe’s biggest financial center, has opposed the move, which requires the unanimous support of all EU countries. The U.K. Treasury reiterated today that such a levy would need to apply globally.
The funny thing is the UK already has a tax, known as the Stamp Duty Reserve Tax, that places a 0.1% tax on stocks and bonds, just like the EU proposal. And they have that because it’s a great way to raise revenue while discouraging high-frequency trading, which is unnecessarily risky.
Britain raised the same fear that every country with a large financial sector raises on the FTT, that business will move to other financial centers and that the tax must be global. An EU enactment, of course, would make a global tax more likely. It would be harder for the US to stop the movement toward an FTT if the financial sector cannot say that their traders will move to Europe to avoid the tax.
Of course, Tim Geithner doesn’t like this idea. He talks of “frictions” that an FTT would create. But this is nonsense. It’s a micro-tax that would raise lots of money off investments where the people involved won’t even notice. Households and small businesses would even be protected from the tax, as brokers would be unable to charge “excessive fees” on trades to make up for the FTT.
The EU executive board approved the tax today, and the global public health sector strongly supported the move. And since France and Germany support the idea, I would think that the eurozone will enact it if they get further resistance from the UK.
Again, I’d be shocked if anything good came out of the European mess. But this is promising.





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Is this why, or part of why, the UK is so opposed?
“City of London officials have said that about 80% of the revenues of any Europe-wide financial tax would come from London.”
More here.
“European governments are split over the merits of a transactions tax, while British banks warn that an EU-only measure would drive business to other regions.”
I see the rich are once again threatening to ‘Go Gault’, as if the rest of us wouldn’t be glad to see them go. And what happens in this worldwide social and economic upheavaling, when there are no more places that will have them?
But of course, this is the dirty little secret they keep even from themselves: They cannot exist without us, but we can do just fine without them.
The Treasury Dept is owned by Wall Street.
Very Sickening.
So let me get this right … Timothy Geithner doesn’t have any problem with corporations stealing pensions that employees have worked for their whole lives, in some cases replacing them with 401K’s that Wall Street will profit from (what are his views on Social Security?), but his problem with the FTT is that it will create unspecified “frictions” in the marketplace? I think Mr. Geithner needs to go pick potatoes in the fields for a few years to learn what it’s like to work (instead of theorize) for a living, have his retirement unexpectedly disappear, and then he’ll probably care less about “frictions” and more about the average workers who are getting shafted everyday.