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Posts Tagged ‘Germany’

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.

 

The Future of the Euro and Europe

June 10, 2010 2 comments

Germany has recently won the Eurovision Song Contest. It was an OK song and a cynical person would suggest that Germany only won because of its bail out of the Eurozone.

But talent contests aside, there is something much greater at stake than the future of Eurovision. This greater something is the Euro and the European Union. Whilst we commend Germany’s action by bailing out the Eurozone, its action also hides and ignores the greater issue that needs to be addressed – further union.

It can be argued that the PIGS (Portugal, Ireland, Greece and Spain) should be removed from the Eurozone and perhaps the European Union. One would be correct in implementing it as a short-term solution. However the problem is long-term as opposed to short-term.

Greece found itself in its awful predicament through a combination of its own economic incompetence and not being able to devalue its currency. Devaluing the currency would have allowed Greece to negotiate with its creditors and alleviate the pressure and given Greece time to sort out its mess without a bail out. However, because the Euro’s monetary policy is set by the European Central Bank (ECB), the ECB was unwilling to devalue  the Euro as it would have damaged, in the short-term, Germany’s economy – as Europe’s largest exporter. The Greece situation also brings into question the effectiveness of the ECB.

To make the ECB and the Eurozone effective, so that a situation like Greece does not occur again, is a fiscal and tax union alongside the existing monetary union. If tax and general economic aims are set centrally in a single currency zone – the entirety of the economic functions available can be put in force so that the entire Eurozone area is protected from future crises. The further union of the Eurozone will be, of course, a huge step towards Federalism.

The problem is economic the solution is political, and there will be opposition. The main source of opposition, we imagine, will be from Germany. Germany, as Europe’s largest economy and exporter, is likely to lose out in the short to mid-term whilst this union settles down.

Politically, many countries, for many xenophobic reasons, will not want to hand over more sovereignty. But it needs not be like that if the federal model that Europe adopts is based on the German model. The German States remain fiercely independent and autonomous yet they have a central government to give them a unified direction.

In conjunction to this move towards federalism we also propose a halt to the expansion of the EU as further expansion eastwards will only serve to weaken Europe. We also flatly reject Turkish application to the EU, this is because Turkey is not part of Europe – it does not share a culture, its economy is essentially third world and its record on human rights etc., is atrocious.

Now to confront Britain’s future with Europe. Britain’s future is with Europe and at the heart of it. Britain’s future is not with America, we share a language but not a culture. America embraces its own form of Anarchism where everyone is out for themselves. Europe, on the other hand, embraces, broadly speaking, variants of Liberalism such as Liberal Socialism or Liberal Conservatism. But whatever variant of Liberalism is embraced the collective ideas of community and society is embraced, largely, by all. Britain’s political and cultural traditions are largely similar with the rest of Europe. A strong Britain in Europe makes Europe strong. A Britain outside Europe is weak.

The problem with Europe at the moment is that it is not the federal super-state that is should be nor is it the trading bloc that it used to be. Because of the current transient nature of the EU, it is scorned by outsiders and by those that should be on the inside.

Once the move to federalism has been established the pooling of resources will be easier and more efficient. No longer will there be cross expenditure on products, services etc.

There is also the matter of a common language in order to execute the provision of services. We advocate Spanish as it is one of the easiest languages to learn. However we do not advocate the eradication of native languages but merely a move towards multilingualism, bilingualism at the least, of all European citizens.

One should take note that what has been discussed above are broad ideas. We understand and appreciate that our end goal, of a federal Europe, will not materialise over night nor is it likely that it will happen within our lifetimes. We would, however, love to see it in our lifetimes and strive at every possible opportunity to make our dream a reality and unleash the true potential of a United and Federal Europe.