Commissioner Barnier’s bank levy proposal

The EU commissioner for Internal Market, Michel Barnier, also responsible for the EU package on financial reforms, issued an official communication last week on a European project of a bank levy with some relevance for the debate on the FTT. Peter Wahl has analyzed the proposal:

Very interesting is that Barnier makes clear, that he considers the bank levy not as a tactical manoeuvre to kick the FTT off the agenda. Speaking of "levies or taxes whose purpose is to recoup the public funds committed during the current crisis to stabilise the banking system or to tackle excessive risk- taking or speculation," he declares: "The examination of such measures should continue in parallel as a useful complement to the preventive funds that are considered in this Communication."

This corresponds to the position of France (Barnier is French) to consider both a bank levy and the FTT. Barnier had spoken out before a commission of the European Parliament in favour of the FTT.

There is some more quite progressive language in the Communication. For instance: "Political support is growing for applying the so-called "polluter pays" principle, known from environmental policy, also in the financial sector so that those responsible for causing it will pay for the costs of any possible future financial crisis."

The communication also takes on board the critique, that the bank levy would increase moral hazard: "The Commission recognises that this is a major concern which needs to be addressed by making it clear and unambiguous that shareholders (up to the value of their investment) and creditors (excluding depositors which are guaranteed by deposit guarantee schemes) must be the first to face the consequences of a bank failure and that resolution funds must not be used as an insurance against failure or to bail out failing banks, but rather to facilitate an orderly failure."

Barnier also is aware of the risk that a bank levy would be passed on to the clients: "It should also be avoided that increased costs are passed on to bank customers in the form of higher charges." Furthermore, the bank levy should be part of a broader framework of regulation which is able to "mitigate the implicit guarantees associated with institutions deemed ‘too big to fail’.

The communication makes already some proposals on the size of the revenues (2%-4% of GDP) and other details.

A detailed draft will be presented in October and the legislation process should start in 2011. The communication is also meant as an input to the G20 finance ministers meeting in Seoul in June.

Of course, it is by now only an official declaration of political will, and during the further process attempts will come up to water it down. Nevertheless, its general tone reflects the deep shock of the Euro crisis and an increasing awareness of European political elites, that they have to do more than they did by now.

Trade Unions’ Message to OECD Ministers: Beat the Jobs Crisis First!

In a statement to the OECD Ministerial Meeting 27-28 May 2010, trade unions urge governments to put jobs, social cohesion, progressive taxation and green growth at the heart of recovery strategies. Global unemployment has risen by 34 million since the crisis began and many millions more workers who cannot find regular employment are not recorded as unemployed. We cannot afford a lost decade of stagnant labour markets and with it a lost generation of youth shut out from productive activity.

Union leaders including Richard Trumka, President of the AFL-CIO United States, Sharan Burrow, President of the International Trade Union Confederation and the Australian Council of Trade Unions and John Evans, General Secretary of TUAC will be taking part in the OECD Ministerial Council as members of the Trade Union Advisory Committee to the OECD. This is the first time that unions and employers have been invited to the full Ministers’ meeting. Union leaders will be taking part in the OECD Forum running on 26-27 May.

The union leaders will argue that rising public deficits across OECD countries must be addressed by growth-expanding demand that leads to an increase in output and jobs. Financing fiscal consolidation through cuts in public services, in social security and pensions would only prolong the jobs crisis and risk a social crisis. OECD governments must change the policies of the past two decades that led to the crisis – financial deregulation, rising income inequality and global imbalances. They must muster the same level of political will that was used to save the global banking system to beat the global jobs crisis.

“Working people need the right skills for tomorrow’s global economy, they need a socially ‘just transition’ to the green economy, and robust labour market institutions, including collective bargaining, to produce fairer income distribution”, says John Evans of the TUAC. “They need progressive tax reforms and stepping up work on tax evasion to protect public finances”. The TUAC Statement also calls for a global financial transactions tax to help pay for the cost of the crisis and to finance the Millennium Development Goals and climate change policies.

EU report on climate change fast-track financing

The European Union is failing to give full details about its €7.2bn pledge for immediate climate finance needs in developing countries. This is the EU’s contribution to the $30bn committed by rich countries in Copenhagen to help poor countries curb their emissions and adapt to a changing climate over the next three years. EU finance ministers meeting on 18 May in Brussels were expected to endorse a progress report on whether and how this money is being delivered.

Oxfam warned the EU is not being transparent enough. The report does not provide clarity on how much each EU member state will pay, on how much it will cover mitigation or adaptation projects, and critically, if this money will come on top of existing commitments to provide 0.7% of national income for overseas aid. Neither is the EU revealing the degree to which funds will be disbursed bilaterally instead of through multilateral channels such as the United Nations, nor how the world’s poorest and most vulnerable people will benefit.

Leaders in Copenhagen agreed ‘fast-start’ finance would be “new and additional”. Oxfam says this means money for climate action in poor countries must come on top of rich countries’ commitment to provide 0.7% of their national income as overseas aid. However, the EU is still divided on how to interpret “additionality”, and it is not alone. The US claims that President Obama’s budget request for climate change finance in 2011 is $1.9bn, but from all appearances that includes double-counting of cash from commitments on food security made at last year's G8 summit in L'Aquila, Italy.

Tim Gore, Oxfam International’s EU Climate Change Policy Advisor, said: “By not being fully transparent about its financing pledges, the EU is undermining trust with developing countries at a very delicate stage of the game. We need an open dialogue about how to guarantee that climate cash comes on top of money already committed for schools and hospitals. There’s no point trying to cover that up. The most important thing is to be honest about the challenges. If there are difficulties, it is better to be open. We expect the EU to address the current shortcomings in a full report later this year, which details how the money will be spent. In a global climate deal, annual reporting is a must”.

Bram and Geer van Velde

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