French President Nicholas Sarkozy took the initiative to address France’s rising deficit proposing a small tax on financial trans actions that was proposed by the European Commission last September and he has won the backing or German Chancellor Andrea Merkel:
The French government, long a proponent of the tax, stepped up its campaign last week, going so far as to suggest that France would impose the levy even if others didn’t. At a joint press conference in Berlin with Sarkozy today, Merkel threw her weight behind the tax.
“Personally, I’m in favor of thinking about such a tax in the euro zone,” Merkel said. “Germany and France both equally view the financial transaction tax as a correct response.”
The European Commission in September suggested a tax of 0.1 percent on equity and bond transactions, and 0.01 percent on derivatives, which it said could raise 55 billion euros ($71 billion) a year. European Union finance ministers are due to discuss the levy in March.
French Prime Minister Francois Fillon said today in Paris that France may present a bill on such a tax in February, hoping that other countries follow.
“Someone has to be the first to jump in the water,” he said.
The new Italian Prime Minister Mario Monti has also signed on to the proposal which had been opposed by his predecessor, Silvio Berlusconi, but did so with a slight reservation:
Italian Prime Minister Mario Monti on Wednesday threw his support behind a new tax on financial transactions, backing a push by Germany and France, but said he would prefer to have it apply across the whole European Union. [..]
“We are open to supporting this initiative at the EU level,” Mr. Monti said at a news conference with Mrs. Merkel during his first visit to Berlin since taking over from Silvio Berlusconi in November.
While the Berlusconi government had rejected a new financial levy outright, Mr. Monti has said he thought it was a good idea, particularly as a means of reducing the tax burden on families.
Opposition to the tax is coming from British Prime Minister David Cameron:
(S)uch measures can scare away big-scale investment companies headquartered in the City of London.
In an interview to the BBC Mr. Cameron said that “the idea of a new European tax when you’re not going to have that tax put in place in other places, I don’t think is sensible and so I will block it unless the rest of the world all agreed at the same time that we were all going to have some sort of tax.”
To put it bluntly, getting “the rest of the world all agreed at the same time” is not bloody likely.
And of course the French banking community is dead set against it claiming that it will “would weigh on growth, lead to a loss of competitiveness, and create a heavy handicap for the financing of the French economy.”
Mr. Sarkozy has political motivations for his backing of this tax since he is facing a particularly tough reelection this Spring. However Ms. Merkel’s may be moving to stave off a slow down in Germany’s economic growth
Germany expanded by 3 percent last year from 2010, the Federal Statistical Office said in Wiesbaden. It noted, however, that the growth came mostly in the first half of 2011, and estimated that the economy actually contracted by about 0.25 percent in the fourth quarter from the prior three months.
Some economists now predict another contraction for Germany in the first three months of 2012, which would meet the usual definition of a recession as two consecutive quarterly declines in output.
Whether this small tax on has any affect on either the French election or the German economy remains to be seen but it is encouraging that some leaders who were opposed to sensible taxation of the 1% are coming around. Now if we could just get them off the austerity boat.
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