Transactions tax is "madness" says Boris

Boris Johnson has demanded the EU’s proposed financial transactions tax be dropped, warning it would badly hit the European economy.

The mayor of London has written to European Commission President José Manuel Barroso, protesting the tax would make European businesses uncompetitive and damage the continent’s jobs market.

The proposals would see a levy of around 0.1 per cent on all financial transactions in the EU, but critics say the real cost per transaction would be much higher.

Johnson urges the Commission to come up with alternative reforms that support growth.

"At a time when many EU member economies are struggling, some on their knees, it would be madness to weigh them down with this new mill stone,” the mayor wrote.

The letter cites the EC’s own estimates that the tax would reduce Europe’s GDP by somewhere between 0.5 to 1.8 per cent.

The policy would hit non-financial businesses with higher borrowing costs, and damage the value of pension funds, the mayor claimed.

This is on top of the direct effects to the financial sector.

Up to 10m people are employed across Europe in finance and related services such as accountancy and law.

These sectors would suffer job losses as businesses were driven to financial centres outside the EU, the mayor wrote.