As a result of the financial crisis - which was mainly caused by excessive risk taking by banks in wholesale money markets - many European Union Member States are now experiencing rising budget deficits. Indeed, in order to rescue failed banks through extensive recapitalization schemes, European governments had to borrow heavily on financial markets, which as consequence increased substantially their public debt.
The main response that has been given by EU Member States to re-balance their national budgets has been the adoption of austerity plans which involve cuts in social benefits and public sector jobs, pension reforms, raising VAT rates, etc. In other words, the focus has been exclusively on curbing expenses, while the search for raising additional revenues has been patently neglected.
In this context, the European Green Party (EGP) is calling for the implementation of a financial transaction tax (FTT) covering a broad base of financial market instruments (stocks, bonds, derivatives, etc.). Such a measure would fulfil two objectives: raising additional resources for Member States and discouraging speculative short-term financial transactions.
Although the FTT has been discussed on several occasions within the Economic and Financial Affairs Council (ECOFIN), no major progress has been made yet in this field. Several Member States and Commission representatives strongly oppose the measure arguing that a FTT would increase the volatility of markets and jeopardize the competitiveness of European financial sectors.
In order to counter such widespread but fallacious arguments, the Greens/EFA group in the European Parliament has recently released a study1 defining the technical and legal conditions for the implementation of a FTT at EU level or, alternatively, as a first step within the Eurozone. The paper makes clear that a European FTT with a tailor made scope is feasible technically and legally. It would contribute to a reduction of systemic risk emanating from high-frequency trading. Moreover, the study designs a European FTT where the risk of circumvention is very low and which maintains a level-playing field between European financial actors and their foreign competitors.
We, the member parties forming European Green Party, therefore
Call upon the EU Council and the European Commission to implement without further delay a financial transaction tax (FTT) at EU level (or, alternatively, as a first step within the Eurozone) in order to render financial market more efficient and to raise substantial revenues to finance fiscal deficits as well as Europe's global commitments (such as in development or climate change).
See http://www.greens-efa.org/cms/default/dokbin/354/354830.financial_transaction_tax_paper@en.pdf
Download the complete resolution in PDF format here...