Saturday, 26 September 2009

Financial Transaction Tax de facto in Pittsburgh Leaders’ Statement

France and Germany managed to get the financial transaction tax (FTT) proposal de facto into the Pittsburgh Declaration of the G20. The IMF is tasked to prepare for the next summit a report on instruments to make the financial industry "a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system" (point 16 of the Leaders’ Declaration).

“This is a positive step”, says WEED’s Peter Wahl. “As the head of the IMF, the French socialist Dominique Strauss Kahn, can be considered to be open to a Transaction Tax, we can expect that the proposal will be carried on. Not only Sarkozy but already Mitterand and Chirac were supporters of a similar tax, the Tobin Tax. The Tobin Tax, however, had only currency transactions as tax basis, whereas the Financial Transaction Tax (FTT) encompasses also bonds, equities, derivatives etc.

There is an extraordinary opportunity for civil society to make the FTT one of her prominent points to organize pressure from below in the time to come and to make the FTT not the solution for everything but a spearhead of campaigning.

The tax offers a lot of economic and politic leverage:
1. It has a regulatory potential. It contributes to curb speculation, will shrink the financial sector and thus contribute to breaking the dominance of finance over the whole economy and society.
2. It has a strong distributional or social equity dimension by making pay those, who were benefitting from the system and are responsible for the crash.
3. As the issue of public debt and who will pay for the bill off the crisis will be on top of the agenda in the coming years, with pressure to cut public expenditure and in particular social budgets, we have with the FTT a powerful tool to say "Let them pay for the crisis". The FTT is a powerful alternative in that respect.
4. There is a strong political momentum with Sarkozy, Merkel, Austria supporting the idea. Also the president of the EU Commission, Barroso, and commissioner Almunia are in favor, as well as the British foreign minister Miliband.
5. There are already a lot of allies in trade unions, churches and NGOs for a currency transaction tax and the media are acquainted with it.
6. There is already a lot of expertise, studies etc. on the issue on which we can build. So, we have not to start from scratch.

At the moment I see three main challenges:
a. All the new supporters of the FTT have an inbuilt self-destroying mechanism in the proposal: they all say that the proposal is only feasible on global level. This is wrong. Of course, it wold be nice to have the FTT globally, but it would already have a strong impact if it is implemented in one major currency zone, for instance the Euro zone. It is the same as with the Kyoto protocol, you can do something without the US having on board. We have to make this argument strong.
b. Civil society has to be flexible and to adjust its strategy to the new situation. This does not mean, that people give up their own agenda, but that we find ways to combine in an intelligent way with our usual work. We should not just do business as usual and try to reshuffle our agenda and resources.
c. Nobody of us loves the Merkels, Sarkozys e tutti quanti, and I know how difficult it is to admit that they could do something which is not per se an evil. But if there is such a clear split inside the elites we have to make those positions strong which have been ours since ten years, even if we Merkel and Sarkozy support it.”

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