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Friday, May 24, 2013

When ideology meets economic reality (part III): Germany squabbles over the Financial Transaction Tax

The Bundesbank, The Deutscher Aktieninstitute (DAI), and even EU civil servants from the 11 participating countries have all warned against the FTT in its current form.

Today saw yet another German voice raised again the tax – this time from the very party that is meant to be its greatest champion. Nils Schmid, Baden-Württemberg's Minister of Finance – from the German social democrats (SPD)— wrote a letter to German Finance Minister Wolfgang Schäuble condemning the FTT in its current form as “rubbish.” Ouch.

Schmid’s intervention, says that "If the financial transaction tax is implemented as is currently planned, initial estimates show that it is likely to have a serious impact on certain segments of the market (money and capital)." He then calls for a “proper configuration” of the FTT.

So why is this important? Twofold:  first, it shows that in light of the overwhelming evidence of the negative economic impact of the FTT in its current form, the support for the proposal is quickly evaporating.

This now extends to the German political parties that have strongly endorsed it. Remember, the FTT is one of the SPD’s main campaigning issues, and served as the party’s quid pro quo for accepting the EU fiscal treaty. Although Schmid caveated his position, saying that he is not opposed to the idea of a FTT in theory, the point has most definitely been made.

Secondly, the FTT controversy has legs to become battleground ahead of the German elections in September. It is an issue that may split politics, both, within the parties and on a national level.

Officially, Schmid’s letter was met with a standard diplomatic line from the German Finance Ministry – which says it is taking concerns raised by Schmid and German banks “seriously.” They won’t say so in public, but the German finance ministry was most likely nodding approvingly…

Meanwhile, deputy chairman of the FDP parliamentary group ,Volker Wissing, saw his opportunity to strike – and took it, saying that Schmid's letter shows with which "naivety" and "rose-tinted blindness", the SPD had driven the demand for a financial transaction tax.

So far the SPD have remained stumm on Schmid’s intervention. But watch this space. If influential figures within SPD are the latest to start make noises about this, then surely, the Commission’s proposal cannot stand?


Anonymous said...

All EU regulation on financial services is designed to close London down.

Will any of the regulations ;

1. Make markets safer?
2. Improve market efficiency?
3. Save investors and market participants money by lowering costs?
4. Improve the overall investor experience?
5. Give investors the regulation that they demanded and need?


Let us all not be naive, this is a TRADE WAR.

Why on earth did Gordon Brown surrender the UK's veto on Financial Services?

Rik said...

FTT has Barroso (give or take an r or an s) written all over it.
Which means:
-not conceptional (no basic concept behind it (more a stew with different ingredients of which the cook didnot really know what he was doing) and no overall view about its set up, deals with several items without trying properly to bring these together);
-totally focussed on making the EU and its institutions more important (more powers and if possible own revenue source).
-Lack of technical knowledge about the subject matter.

It is all totally predictable. However that means there will be reasons galore and plenty of complications not properly considered. Which means there is a near endless source of discussion points you can come up with. Not even to mention the wording which is usually crap with the EU.

Likely the most effective strategy will be let it drown in complications (as is basically happening now) and defer actual decisions because of that. Until politicians and the public with it (this is not the debtcrisis but a thing that will be forgotten and anyway unlikely make much difference at the polls) lose interest and it can be safely put where it belongs: the dustbin.

Mainly the work by some people from the left with a proper understanding about underbelly feeling of their electorate but none about financial issues. Make clear that eg pensionfunds (one of the top-priorities for their electorate) will have to pay a price and therefor pensions will get hit. And that kind of stuff.

christhai said...

Barroso may have crowed about the FTT but the authors of this piece of legislative trash - are the French.