Euro crisis: Europe needs the UK but not a Tobin Tax, the finance minister told a British Chamber of Commerce event on Wednesday.
Photo: Olivier Minaire
With the British ambassador in the audience, Luc Frieden expressed disappointment over the recent UK veto of tighter EU budget controls (for the British government perspective, see “Positive stereotypes”). The finance minister said he was “sad” that Britain was the sole dissenter at last December’s meeting of EU leaders. Ultimately, Luxembourg--and in his view, several other member states--could support many British demands, but UK prime minister David Cameron did not effectively communicate Britain’s point of view and perhaps gave an ill-timed presentation of his case.
“Sometimes the British are a little late, so there’s always hope” that the UK will join with the other 26 members at the euro zone table. “Europe would be well advised if we stuck together and moved ahead with all 27.” Frieden later said, “We need Britain and Britain needs us.”
(On Thursday, the Financial Times reported that it had seen a leaked draft of a revised agreement which incorporates many of the UK’s demands on the single market, bolstered by allies such as Germany, the Netherlands, Sweden and within the European Commission in Brussels. If the FT’s report is correct, it would mark a belated partial victory for Cameron.)
Following his speech, Frieden was asked--by the former deputy director of ALFI and now KPMG partner Charles Muller--if the Grand Duchy supported the so-called Tobin Tax, which would be a small levy on all financial transactions. “The Luxembourg government has not yet finalized its position of the draft proposal that has been tabled by the European Commission,” the finance minister responded with the cabinet’s official position. “Clearly I consider such a tax to be risky if all the major financial centres in the world do not apply it in the same manner,” he then explained.
The French president and German chancellor are seen as the primary proponents of a Tobin Tax. But Frieden questioned the leaders’ true level on enthusiasm for the financial transactions tax. Nicolas Sarkozy faces a tough re-election in the spring, and Luxembourg’s finance minister seemed to think Angela Merkel’s support is not as strong as is popularly believed.
Frieden admitted the Tobin Tax might prove popular with the public--even in Luxembourg--especially if it was introduced as a means to reduce personal income tax. However, if the financial transaction tax were only introduced in Europe, in Frieden’s view institutions would quickly move their operations outside of the EU.
So “at this time, the plan does not find my approval,” he said. “Sweden introduced such tax 20 years ago,” Frieden added. “It was good for London,” as Swedish financial institutions decamped from Stockholm en masse. The Swedish government has since rescinded the measure.