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Schäuble calls for financial transaction tax

Eurozone members could introduce a financial transaction tax even if other EU countries were opposed, German Finance Minister Wolfgang Schäuble told the Financial Times in an interview published Monday.

Published: 31 October 2011 06:20 CET

Schäuble calls for financial transaction tax

Photo: DPA

Schäuble said he backed using the 17-member eurozone as a testing ground for the levy, which is designed to restrict speculative trading, even though Britain and its vast financial sector are firmly against it.

Schäuble said he respected the arguments of Britain, a member of the European Union but not of the eurozone.

He hoped it would be convinced to adopt the tax if it proved to be a success within the eurozone.

Schäuble hoped an agreement could be reached at this week’s G20 meeting in Cannes, France, before the proposal was presented to EU finance ministers on November 8.

The minister also said that the current debt crisis was an opportunity to push for closer fiscal union within the eurozone.

Schäuble told the FT that the bloc needed “stronger institutions to oversee the implementation of a commonly agreed finance policy.

“That is what I call fiscal union,” he added. “We need to take big steps to get that done.”

Britain is also worried about closer fiscal union within the zone, fearing it may be left out of key policy-making decisions.

Despite last week’s deal to rescue the eurozone from immediate danger, many economists fear that the sovereign debt crisis may have some distance to run, with Italy’s situation a major cause for concern.

Schäuble urged Italy’s leaders to live up to their own responsibilities and solve its own problems.

Creditors last week agreed to take a 50-percent hit on outstanding Greek debt.

But in an interview with the BBC aired on Monday European Central Bank chief Jean-Claude Trichet has warned other European countries in financial difficulties not to expect such generous terms in the event of a bailout.

“Greece was Greece and everybody recognises that it is a special case,” he

said.

AFP/mdm

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How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year.

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’, Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn.

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment?

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024 about 1 percent below the estimated structural level.

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending?

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”. The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”.

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025.

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023.

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write.

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers.

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”

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