German Chancellor Angela Merkel and the French President Nicolas Sarkozy insisted on Monday that they do want to press ahead with a financial transaction tax by March, even though Merkel admitted her government is divided on the issue and Britain and the banking world oppose it.
The problem is that unless such a tax is introduced right throughout the financial world companies will move to avoid paying it, a Baader Bank analyst Robert Halver pointed out: “It makes no sense to have only in one country a financial transaction tax, because the investors will go to other countries, into England, to Germany, to do their business in those countries. So it makes no sense. We have to have a financial transaction fee in all countries of the euro zone, that would make sense, not in just one country.”
British Prime Minister David Cameron recently said he would veto a European-wide financial transaction tax unless it was adopted globally, deepening a confrontation with European Union heavyweights France and Germany.
He added that France should be free to go it alone and introduce a financial transactions tax if it wished.
As well as the UK’s objections, the French Bank Federation has already warned its members may be forced to move a large part of their operations abroad if France unilaterally goes ahead with such a tax which it says would be inefficient, counter-productive and would handicap the French economy.