The financial transaction tax: moving towards a fair Europe?
by Anni Podimata
The financial transaction tax is one of the few socially just measures being promoted in Europe today – argues Anni Podimata MEP
Five years after the collapse of Lehman Brothers on the other side of the Atlantic, the eurozone still finds itself in the middle of a crisis. It has been half a decade since the fear of a massive financial meltdown led to the greatest assumption of private financial sector losses by the public sector – that is the state budgets of Europe.
In Europe, this resulted in an increase in the total European Union public debt by approximately €4 trillion – or by more than 25 points of the gross domestic product – in the last five years when during the whole decade of 1997-2007 it had increased by only €2 trillion, which practically corresponded to a decreasing public debt as a percentage of the GDP. Could it have been otherwise? The answer is 'no'. The cost of a total collapse of the financial sector for the European economies would have been much bigger.
However, the alternative to a conservative approach - focusing just on austerity and deregulation of labour and markets - becoming dominant in the EU, is a coordinated effort for a fairer sharing of the costs of the crisis; through limiting and not widening the disparities within and among member-states. And for standing up against the purely speculative behaviour of the financial sector, which creates systemic risk.
The truth is that in the last three years a number of steps were taken towards better regulation and surveillance of the financial markets. The proposal for the creation of a common banking union is also a step in the right direction. But far as the fair distribution of costs is concerned, we are dramatically lagging behind. Europe, engrossed in its effort to regain market confidence, underestimated the systemic risk posed by the growing lack of confidence on the part of the citizens. The consequences are manifesting themselves today: a widespread lack of confidence and a strengthening support of the extreme, nationalistic and anti-European movements and parties - not only in those countries which are in financial dire straits but across all Europe.
Fortunately, something seems to be changing of late. Three years after the transformation of the financial crisis into a fiscal crisis, the rationale of 'special cases' and the stereotypical perceptions about the 'profligate south' have decreased while the realisation of systemic risks, the interdependence of problems and the need for articulating complete and coherent European answers seems to be growing. It is becoming solid common ground. In this environment, we have witnessed initiatives such as the European Central Bank's decision to buy unlimited amounts of government bonds in the secondary bond market, the endorsement of the radical proposal for a bank union and, of course, the initiative to strengthen the European Monetary Union - both institutionally and politically.
An unquestionable milestone on this path has been the decision by 11 eurozone member states - France, Germany, Austria, Belgium, Slovakia, Greece, Portugal, Spain, Italy, Estonia, and Slovenia - to introduce a financial transaction tax under "enhanced cooperation". It is one of the few socially just measures being promoted in Europe today as it aims to shift the burden from the citizens, the labour and the productive activities not to banks and the financial industry in general but to those practices and financial activities - which are purely speculative and dangerous for the stability of the financial sector. This measure achieves a double objective. It increases revenue for the state budgets that will not be coming once more from the conscientious taxpayers. And it provides an incentive so that the financial sector abandons its risky financial transactions and orients itself anew to the financing of real economy.
Anni Podimata is a Greek Socialist MEP and vice-president of the European Parliament
The eurozone never had more than a sporting chance
If there had not been a global economic crisis all might have been well, in time. But the national markets within the single market showed their different degrees of resilience to the shocks which hit them – and the eurozone became an incipient transfer union – writes our secret columnist
Fair? The IMF's FTT final report for The G-20 of June 2010 said: "Its real burden may fall largely on final consumers rather than, as often seems to be supposed, earnings in the financial sector." The UK Parliament European Scrutiny Committee citing the European Commission's FTT impact assessment, before including negative relocation effects stated that "a 3.43 per cent fall in EU GDP equates to a fall in economic output worth €421bn (£362bn) and a 0.34 per cent fall in employment equates to a loss of 812,000 jobs".