Robin Hood tax 'simply madness' says Cameron at Davos
by Daniel Mason
David Cameron has slammed proposals for a financial transaction tax as "simply madness" in a speech at the World Economic Forum in Davos today. The British prime minister blamed European Union red tape for destroying jobs, and urged eurozone leaders to take bolder action to solve the crisis.
Cameron said Europe's economies faced a "perilous moment" with growth stalled and unemployment rising, and warned that there was a real danger that it may be left behind by emerging countries such as China. But he said political leaders should not be held back by a "fear of failure", and had to demonstrate leadership. Implicitly criticising the handling of the eurozone crisis so far, he called for an end to "tinkering here and there" and "hoping we'll drift to a solution", insisting instead on "boldness not caution".
Vital progress had been made, he told the annual forum – attended by 2,600 politicians and business leaders – but "urgent short term measures" were still required to boost business and investor confidence. "The uncertainty in Greece must be brought to an end. Europe's banks recapitalised. As the International Monetary Fund has said, the European firewall needs to be big enough to deal with the full scale of the crisis."
However, he railed against the EU's proposed financial transaction, or 'Robin Hood', tax. Pointing to the European Commission's analysis that the levy could reduce EU gross domestic product by €200bn, cost 500,000 jobs and drive 90 per cent of some markets elsewhere, he described it as "quite simply madness". And the prime minister also criticised EU measures such as the Agency Workers Directive and the Working Time Directive, which he said imposed unnecessary burdens on businesses and government, and destroyed jobs.
Claiming he believed that single currencies could work if managed properly, Cameron said the system needed a central bank that stands behind the currency, the "deepest possible economic integration", and a system of fiscal transfers and collective debt issuance. "Currently it is not that the eurozone doesn't have all of these, it's that it doesn't really have any of these," he said, though he accepted that now some eurozone countries were taking "painfully difficult steps" to address deficits and giving up a degree of sovereignty by agreeing a fiscal compact.
Yesterday German Chancellor Angela Merkel, opening the conference at the Swiss ski resort, said the EU lacked the political structures for the single currency to function properly and member states should become "more European". But she said Germany would not contribute more to the €500bn eurozone bail-out fund due to take effect in July because it would be wrong to "promise something that we will not be able to fulfil". Instead she called for more integration and more powers to be transferred to the EU level. "We have taken some steps closer to a fiscal union, but we can get faster, gain speed and become more decisive," the German leader said.
Cameron said Europe's Achilles Heel was a lack of competiveness. "The statistics are staggering," he said. "As measured by the World Economic Forum, more than half of European Union member states are now less competitive than they were this time last year while five EU member states are now less competitive than even sclerotic Iran. For every euro invested in venture capital in the EU, five times as much is being invested in the United States." He said the focus should be on completing the single market, which could add €800bn to Europe's GDP, and exempting small business from regulations. He also called for the completion of a series of free trade deals that are currently being negotiated, saying they could boost EU GDP by €90bn, and for Europe to push for new agreements with the United States and Africa.
And tackling the subject of his veto at December's summit, which forced the other member states to negotiate the fiscal compact outside the framework of the EU treaty, Cameron said: "To those who think that not signing the treaty means Britain is somehow walking away from Europe let me tell you, nothing could be further from the truth. Britain is part of the EU. Not by default but by choice. It fundamentally reflects our national interest to be part of the single market on our doorstep and we have no intention of walking away."
Turning to the UK's domestic economy, which contracted by 0.2 per cent in the last quarter of 2011, Cameron claimed the coalition government was being "bold and decisive" in getting to grips with debt. He said: "Britain has shown it's possible to earn credibility and get ahead of the markets. Our borrowing costs have fallen to the lowest for a generation. We will be equally bold in meeting our ambition: supporting enterprise and making Britain the best place in the world in which to start or grow a business."