Taking on the Speculators: What Would a European Tobin Tax Really Mean?

The idea is age-old, but its time may soon be coming. A tax on financial transactions could help to stem short-term speculation on the markets. French President Nicolas Sarkozy wants to push the tax through in Europe -- if necessary even without Britian, which has doggedly resisted such measures. Sarkozy picked up a new ally for the plan this week as well: German Chancellor Angela Merkel is also willing to venture going it alone to implement the tax exclusively within the 17 members of the euro zone. It would not directly apply to London, Europe's most important financial center.

Ironically, it was a Briton who first came up with the idea for such a tax. In 1936, economist John Maynard Keynes suggested using the tax in order to curb speculation. In the 1970s, American economist James Tobin's work on the issue brought the proposed tax to the attention of the left and critics of globalization. The so-called "Tobin tax" was a founding demand of the Paris-based, globalization-critical network Attac, whose acronym stands in French for "Association for the Taxation of Financial Transactions and for Citizens' Action."

In the meantime, the idea has also picked up some prominent advocates, including the American Nobel Prize-winning economist Joseph Stiglitz. Last year, Stiglitz told the Frankfurter Allgemeine Sonntagszeitung newspaper: "I am convinced that if Germany, France, Spain and Italy were to implement the financial transaction tax together, it would work."

But what would the tax look like? What are the objectives behind it? And what are the downsides? SPIEGEL ONLINE answers the most pressing questions.

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• Part 1: What Would a European Tobin Tax Really Mean?
• Part 2: How Would the Tax Work?
• Part 3: What Is the Tax Meant to Achieve?
• Part 4: Can the Plan Work without Great Britain?
• Part 5: Do Any Countries Have Experience with Similar Laws?
• Part 6: What Disadvantages Would the Tax Have?