EUROPEAN Central Bank president Jean-Claude Trichet yesterday made a passionate appeal to EU lawmakers to abandon plans for a devastating tax on financial transactions.
The European Commission wants to raise what it claims would be €200bn (£172bn) by imposing a 0.05 per cent fee on every type of financial transaction across the EU, to fund higher spending from 2014 onwards.
But in frank words to the EU parliament, Trichet warned that plans to levy such a Tobin tax on the financial services sector would cause lasting harm to Europe’s financial services hubs and would be regretted. He compared the controversial plan with “putting sand in the machine” of the financial system.
“I call for great, great prudence in introducing something which is not done at a global level,” Trichet said.
“Let’s be sure we don’t do something we might regret one day,” he warned. “If certain transactions are considerably more costly in Europe than in other parts of the world, they will be done overseas.”
But supporters of the tax, such as EC president Jose Manuel Barroso, have said it would “create appropriate disincentives for overly risky or purely speculative transactions” and would also “address concerns about excessive profits” in the financial sector.
Critics of the tax say that there is no way it would raise the billions of pounds promised by proponents.