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On Tobin tax, French president outflanks socialist rivals, but at what cost?
BRUSSELS, Belgium — Days after paying homage to France’s national heroine Joan of Arc, President Nicolas Sarkozy has launched a battle of his own, taking on the international financial markets which many in his country blame for Europe’s economic woes.
His announcement that France will press ahead unilaterally with a tax on financial transactions, even without the support of other European nations, has been hailed by supporters as an act of political bravery worthy of the medieval warrior maiden.
For critics however, Sarkozy’s plan is financial folly and a cynical attempt to garner votes in the run up to presidential elections in April.
Governments have toyed with taxing financial transactions since the idea was first muted by American economist James Tobin in the 1970s.
As the debt crisis has bitten ever deeper in Europe, the idea of raising billions by taxing bankers rather than hard-pressed voters has seemed increasingly appealing to governments. However, the prospect that spooked bankers would respond by fleeing to Switzerland, Hong Kong, Dubai or some other haven, has ensured that the Tobin tax has remained on the drawing board.
Germany and Italy agree in principle, but only if there is a broad agreement, at least within the EU and hopefully across the G20. Britain, however, fears an exodus from the City of London’s financial sector which is crucial to its economy. Prime Minister David Cameron insists he’ll veto any European Union transaction tax.
Late last week Sarkozy signalled he’d had enough talking and on Monday he insisted that France was prepared to go it alone.
“We should lead by example. There are a lot of imbalances in the financial field and we have to do something to set that right,” Sarkozy said alongside German Chancellor Angela Merkel at a news conference in Berlin. “Others will join us,” he said.
The French leader is backing a proposal drafted by the EU’s head office in September for a tax of 0.1 percent on share and bond transactions and 0.01 percent on derivatives. The European Commission argues such levels won’t frighten banks away and could raise up to 50 billion euros a year for cash-strapped EU governments.
Whatever the rights and wrongs of the tax, Sarkozy’s embrace of it has underscored his credentials as a wily political operator by wrong-footing opponents on the left. His visit last week to the birthplace of Joan of Arc to proclaim her a symbol of French unity also challenged the far-right National Front party which has used the saint’s image to rally support in previous campaigns.