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

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Angela Merkel and Nicolas Sarkozy are pressing forward with plans to introduce a financial transaction tax in the EU -- if necessary without Britain, home to Europe's largest financial center. Critics believe it will cause an exodus of the industry from the euro zone. But a closer look at the proposal suggests the worst wouldn't necessarily come true.

The German banking capital Frankfurt: Life could soon get more expensive for the financial industry in Europe. Zoom
DPA

The German banking capital Frankfurt: Life could soon get more expensive for the financial industry in Europe.

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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1. beegdawg007
beegdawg007 01/11/2012
I understand how this tax would raise tax revenue, but I fail to see how it helps to resolve the financial crisis in Europe? The real problem is that the Southern European countries are simply not as efficient as the Northern European countries. Hence, and annual balance of trade deficit exists which sends jobs every month from the south to the north. Raising more taxes just means that a € that would have gone into private hands, will instead go into the government coffer.
2. beegdawg007
beegdawg007 01/12/2012
sysop, some feedback. You are taking way too long to approve comments. It is not possible to hold a conversation, even online when hours pass between comments. The Telegraph, Guardian and most other media that allow commenting, post comments immediately. If the comments are reported frequently as being inappropriate the sysops for those sites, then delete the comment. You should consider doing likewise if you really want these forums to work well! As it is now, this is a pain in the you know where...
3. Taking on the Speculators?
zipit 01/12/2012
Since when has imposing a tax stopped speculators? I'm British and pro-European. I want my children to live and work in any EU country - as I already do. I want free trade and the ability to travel freely - as I already do. I am confused though as to why many of my fellow Europeans are blaming the UK, and are now ostracising/excluding them, because the UK will not agree to such a tax? Especially when linked with a crisis in the Euro Zone? The tax will materially affect the UK more than any other EU country and is affectively a tax on some 12% of its GDP. The UK elected to opt out of the Euro. It has suffered the consequences. It failed the ERM, where, when other EU countries (Notably Germany) were asked to help they did not. Stirling has since been devalued some 40% against the Euro. Is that an accurate reflection of the value of Stirling - especially against the Euro being used in the so called PIIGS? Over a million British people, while living in these countries, are struggling to live on an income based on Sterling pensions/investments might disagree. They might also show some resentment when the nationals within these countries already retire earlier and receive larger state pensions.
4.
zipit 01/13/2012
Zitat von sysopAngela Merkel and Nicolas Sarkozy are pressing forward with plans to introduce a financial transaction tax in the EU --*if necessary without*Britain, home to Europe's largest financial center. Critics believe it will cause an exodus of the industry from the euro zone. But a closer look at the proposal suggests the worst wouldn't necessarily come true. http://www.spiegel.de/international/business/0,1518,808592,00.html
"But a closer look at the proposal suggests the worst wouldn't necessarily come true". Only "suggests"? Why would anyone wonder why the UK would object to such a Tax when it could potentially loose 12% of it's GDP and is being asked to gamble on what "wouldn't necessarily come true" with regard to "an exodus of the industry". If it did come true - would Germany & France step up to the plate and help their British European partners? Not if Greece is anything to go by.
5.
tnt_ynot 01/13/2012
Zitat von sysopAngela Merkel and Nicolas Sarkozy are pressing forward with plans to introduce a financial transaction tax in the EU --*if necessary without*Britain, home to Europe's largest financial center. Critics believe it will cause an exodus of the industry from the euro zone. But a closer look at the proposal suggests the worst wouldn't necessarily come true. http://www.spiegel.de/international/business/0,1518,808592,00.html
The Merkozy show was for the French voters and the upcoming presidential election as described a king and four queens plus short people at : http://euro-meltdown.blogspot.com/ Anthony
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