March 3, 2011
Regarding ‘FTT: The time is now‘:
There are two reasons why members of the European Parliament on Tuesday (8 March) should vote ‘yes’ to the report by Greek Socialist MEP Anni Podimata, which makes a balanced case for the feasibility and the implementation of a tax on financial transactions. An FTT would contribute to economic stability and provide a new source of revenue: two elements the EU cannot do without.
The ‘casino economy’ – in which money becomes the commodity to be traded, not goods and services – has exploded in the last two decades. This has divorced real growth, production and job creation from the majority of financial transactions, which are purely speculative, and end up generating ‘bubbles’.
In 2008, for example, the trading of financial transactions was approximately 74 times higher than nominal global gross domestic product. In 1990, it was only 15 times higher. Just in the past decade, the trading of derivatives and foreign exchanges has far surpassed global trade. The most pressing problem is that short-term trading leads to high levels of volatility over the long term. This volatility has exacerbated the negative effects of the financial crisis.
The response to the crisis is already being felt by the social sector while the EU continues to drag its feet on implementing measures such as a small Financial Transaction Tax (FTT). The FTT would make short-term speculation more expensive and therefore have a stabilising effect on asset prices and thereby overall macroeconomic performance in Europe.
In addition to stability, the FTT could provide the money the EU urgently needs to deal with the challenges it faces. An FTT implemented at a rate of 0.05% on all financial market transactions could raise €209 billion (US$289 billion) in the EU alone, every year. The revenue generated would be sufficient to finance development priorities at home and at the international level.
A majority of EU governments, encouraged and supported by the Commission, insist that national public debts must be reduced via a programme of austerity and cuts. There is mounting evidence to show that this is having a disproportionate impact on the most vulnerable and the poorest in our societies. Social unrest is growing. This situation cannot continue for much longer. The holes in European budgets cannot be plugged at the expense of the poor and most vulnerable.
At the global level the lack of finance continues to be a critical factor standing in the way of providing billions of people even their basic needs such as proper health care, sanitation, clean water and qualitative education. Take the example of climate change, which exacerbates poverty and the lack of access to basic services. At last December’s global climate conference in Cancun, the international community promised to create a new Green Climate Fund financed with €72 billion (US$100 billion) initially. Yet in the face of fiscal consolidation and austerity measures to recover from the financial crisis, it is unclear where the EU is going to find the resources to contribute to this fund.
We believe it’s up to members of the European Parliament now to stand alongside the people and support the FTT by voting ‘yes’ to the Podimata report.
Jean Letitia Saldanha
International Alliance of Catholic Development Agencies (CIDSE)Author : Letters to the EurActiv editor