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Posts Tagged ‘Euro’

Scrap the FTT, have a Bourse Tax instead

January 20, 2012 1 comment

At 10.53 on 20th January 2012, the Telegraph reported on their live blog:

10.53 A German Government spokesman says that an EU-wide financial transaction tax is still the goal, but that there may be a possible bridge with the UK via a bourse tax.

What is a bourse tax?

Frankly, I have no idea beyond speculating that it’s a tax on transactions within a stock exchange. A bourse is an organized market where tradable securities, commodities, foreign exchange, futures, and options contracts are sold and bought. The very things which would be taxed under a FTT anyway.

The fact that it is limited to the individual exchanges would mean that it is an attractive deal to the British. However it does raise complications, considering that the largest Pan-European exchange, Euronext, merged with NYSE in 2007. Another large European exchange, OMX is a Scandinavian exchange with activities in Norway. Confining finance and the taxation of finance to the Eurozone will only create more problems than solutions.

However, with the smaller exchanges, such as the Deutsche Boerse, this confinement could happen without angering any non-eurozone interests.

The ECB won’t save the day, but Germany might

November 14, 2011 1 comment

As things stand in the Eurozone the European Central Bank (ECB) is incapable of providing the much needed status of Lender of Last Resort. It is prohibited from printing money by the Maastricht Treaty, but it is able to buy government bonds as part of its function to maintain price stability. As had been experienced last week when there was a run on Italian and Spanish bonds, the ECB bought bonds to force the price down, and thus stable (for a short period of time).

As has been pointed out by Paul Krugman, the crisis that is currently striking the Eurozone is a result of an imbalance of payments. Germany, thus, needs to spend. It’s very rarely that I praise George Osborne, but he has said:

“If you think of currency unions, here in the United Kingdom or in the United States, we do transfer money around the country in order to try and get greater equality in the economy. I’m afraid that needs to happen in the euro, because we are not there yet and the instability is having a huge effect.”

This is crucial for the survival of the Euro. A monetary union requires a fluid movement of capital across the union. So far, the Euro has been a disappoint. A monetary union without the necessary sacrifices to make it work. I believe it has only worked through a series of fortunate circumstances, such as a prolonged period of growth. 2008/9 was the the first time the Eurozone had experienced a recession in its 10 plus year history. Now that a sovereign debt crisis has struck the southern economies of Greece, Italy and company – which was created by the cheap and easy credit of the noughties – it is the first time where the Euro has been tested to its limits. Its limits have proven to be woefully weak.

But progress is being made, on the political stage. On Monday, at a Christian Democrat Union (CDU) Conference, Merkel was reported to have pressed for an economic and political union in the Eurozone. @EPPTweet tweeted earlier: RT @SMuresan#Merkel at #CDUpt11: “We have to complete monetary and economic union and pave the way for political union in #Europe” #epp

This is a step in the right direction, but there also remains a stumbling block – the German constitution. We shall see what happens, but progress is being made and the faults of the Euro are, apparently, in the process of being corrected.