The Times - Thursday, 8th April 2010
After many weeks of confusion and political wrangling, the 16 eurozone countries have finally reached a deal on how to help debt-laden Greece. Like most political compromises, it is an agreement filled with caveats, imperfections and uncertainty.
The fine details of the deal remain unclear but the substance is a financing plan potentially worth €30 billion. It would consist of the 16 eurozone nations granting coordinated bilateral loans worth up to €20 billion, counting for two-thirds of the money, with the International Monetary Fund (IMF) providing the rest.
The involvement of the IMF is widely being seen as a defeat for the French government and others who believe that the eurozone should be able to look after their own. However, it was one of the preconditions for the German government agreeing to the deal. Public opinion in Germany is strongly opposed to using German funds to assist Greece and Chancellor Angela Merkel may still pay a political price for agreeing to any deal that could involve German money.
I do not think this new agreement constitutes a bailout. It is one thing to implement a bailout and quite a different thing to establish an instrument to provide temporary financial assistance. Indeed, all sides - President Herman Van Rompuy, Greek Prime Minister George Papandreou, French President Nicolas Sarkozy and Ms Merkel - have stated that they do not want this financial safety net to ever be used.
Instead, they believe that the existence of the plan should bring down Greece's borrowing costs. In other words, this agreement is not a bail-out but a guarantee to financial markets that the eurozone will not abandon one of its members. It is also an attempt to stabilise the euro, which has fallen by about seven per cent against the US dollar in the last three months.
While there has been a great deal of public confusion amid fevered talk of bailouts we should not forget that Greece's problems are not just the result of a fiscal crisis but also a competitiveness crisis. Its budget deficit is running at 13 per cent alongside unit labour costs that have risen by 35 per cent against Germany and 60 per cent against the US in the last 10 years. Both problems must be corrected if Greece's public finances are to become sustainable. Indeed, the Greek government must continue its programme to correct its budget deficit and meet its target to cut the deficit by three per cent this year, alongside reforms to improve the flexibility of its labour markets and innovation. If it cannot convince financial markets that it is serious, then loans and guarantees from the eurozone and the IMF will not be worth the paper they are written on. The position of Greece in the eurozone would remain fragile. In the meantime, the risk premium will now be shared with the eurozone countries where the spreads have already responded.
However, it would be wrong to blame Greece for the problems of the eurozone. Greece's plight is a symptom of a wider ailment in the European economy, where big imbalances in fiscal policy and competitiveness have led to a two-tier eurozone with disciplined members such as Germany and the Nordic countries in one group and the so-called PIGS in the other. Portugal's credit rating has been downgraded from AA to AA- and Spain is also vulnerable.
This divide led to demands at the EU summit, led by Mr Sarkozy and Ms Merkel, for a new "economic government" of Europe, with macro-economic policies more closely directed at EU level. This debate creates another set of political divides. While the Germans see economic governance as a means to introduce better monitoring of economies such as Greece, which had no independent statistical agency, the concept means something more political to the French President and others.
Certainly, it would be misguided to think that this EU summit agreement is the end of the difficulties facing Greece and the eurozone. The fine print of the EU "financing plan" will have to be agreed while the debate about the economic governance (or government) of the EU is one that has only just begun.
17.5.10
Taxxa globali…għad narawha?
www.l-orizzont.com - L-Erbgħa, 7 ta' April, 2010
Diversi huma l-problemi kbar li qiegħda tħabbat wiċċha magħhom id-dinja. Hemm problemi li ilhom magħna, u huwa għajb li għadhom magħna, bħalma huwa l-faqar fost il-pajjiżi, u hemm problemi li tista’ ssejħilhom riċenti, bħalma huma dawk maħluqin mit-tibdil fil-klima. U hemm problemi li donnhom għandhom ċiklu, li jolqtuna kull tant żmien, bħalma hija l-kriżi finanzjarja, li din id-darba kienet waħda internazzjonali, u li l-effetti severi tagħha varjaw minn pajjiż għal ieħor, skont kemm il-pajjiż kellu riżorsi biex jilqagħlha.
“Pakkett problemi” li sab ruħu fl-iskaluni ta’ fuq nett tal-aġenda internazzjonali, preċiżament quddiem il-grupp magħruf bħala l-G20, li bħala grupp irid jara kif se jilqa’ għal dan kollu, b’mod partikolari biex jissalvagwardja l-ekonomija globali, u allura lill-pajjiżi kollha milquta. Fil-ġimgħat li għaddew bdejna naraw u niddiskutu f’livell ta’ Parlament Ewropew, proposti ta’ salvagwardja. Proposti li finalment bħal kull assiguraz zjoni jfissru finanzjament, u allura kif se jinġabru l-finanzi meħtieġa.
Proposta fuq dawn il-linji hija l-ħolqien ta’ taxxa fuq transazzjonijiet finanzjarji. Issa ilu numru ta’ ġimgħat sew li l-Parlament Ewropew, imlaqqa’ fi Strasbourg, iddibatta u adotta riżoluzzjoni li ressaq il-Kumitat għall-Affarijiet Ekonomiċi u Monetarji (ECON) li tat in-nifs lill-Unjoni Ewropea biex tiftiehem fuq pożizzjoni komuni dwar il-kwistjoni u tinnegozja mal-pajjiżi tal-G20 u mexxejja internazzjonali oħrajn, u biex il-Kummissjoni tħejji studju dwar l-impatt ta’ taxxa globali fuq transazzjonijiet finanzjarji, meqjusin il-vantaġġi u żvantaġġi potenzjali ta’ taxxa bħal din.
Kien il-kompitu tiegħi bħala Viċi-Ċermen tal-ECON li nressaq il-mozzjoni u mmexxi d-dibattitu Parlamentari dwarha. Fakkart kif 40 sena ilu, bħala student, parti mid-diskussjoni dwar l-Ordni Ekonomiku Internazzjonali Ġdid kienet dwar kif, dawk li kienu jissejħu SDRs (Special Drawing Rights), issirilhom xi forma ta’ taxxa fuqhom, imħallsa mill-gvernijiet, biex il-flus minnha jintużaw għall-programmi ta’ żvilupp f’pajjiżi fqar. Huwa fatt magħruf li dan il-ħsieb ma mmaterjalizzax.
Jista’ jkun li llum, b’riżultat tal-globalizzazzjoni, flimkien ma’ avvanzi teknoloġiċi u rieda politika akbar, ċerti pjani huma aktar fattibbli. Fl-istess ħin irid jingħad li żdiedet ukoll sewwa l-kompetittività fost l-għanijiet globali. Għalhekk wieħed irid joqgħod attent.
Hemm dik li tissejjaħ Tobin Tax, li taħseb għall-użu ta’ taxxa żgħira fuq transazzjonijiet finanzjarji, li d-dħul minnha jmur għal għajnuna ta’ żvilupp. F’Set tembru li għadda, fil-laqgħa tal-G20, kien hemm mexxejja politiċi li riedu li s-settur finanzjarju jħallas għal twaqqif ta’ fond ta’ stabilità u jipprovdi kumpens għall-ħsarat ikkawżati mill-kriżi finanzjarji lill-ekonomija dinjija.
Sadattant il-President tal-Unjoni Ewropea, Jose Manuel Barroso, issuġġerixxa l-introduzzjoni ta’ taxxa globali biex tiffinanzja proġetti ambjentali.
Dan kollu jeħodna lura għall-“pakkett problemi” li bdejt bih din il-kitba. Il-mistoq sija naturali hija: nistgħu verament nużaw taxxa waħda biex nilħqu dawn l-għanijiet differenti u f’daqqa?
Bħal kull munita oħra, din il-munita għandha żewġ uċuh. Hemm argumenti sodi favur taxxa fuq transazzjonijiet finanzjarji, u hemm riservi u mistoqsijiet daqstant ieħor sodi dwar kif jistgħu jinġabru l-fondi minn dawn it-taxxi; jekk l-ispiża tal-implimentazzjoni hux se tkun akbar mid-dħul innifsu; u min se jiddeċiedi kif jintużaw il-fondi miġburin.
Huwa eżattament għalhekk li r-riżoluzzjoni tal-ECON titlob għal studju dwar l-impatt minn tali taxxa proposta (li se jsir mill-IMF) biex ikunu jistgħu jitwieġbu numru sostanzjali ta’ mistoqsijiet.
Mistoqsijiet bħal kemm potenzjalment jista’ jkun id-dħul minn taxxa bħal din; x’effett ikollu fuq il-livell tal-prezzijiet; x’kienu l-esper jenzi minn taxxi simili preċedenti fejn jirrigwarda evitar ta’ ħlas ta’ taxxa u ċaqliq ta’ kapital jew servizzi; jekk taxxa tgħinx biex ikunu stabilizzati s-swieq finanzjarji; u, forsi l-aktar punt kruċjali, il-benefiċċji u l-iżvantaġġi li taxxa bħal din tkun stabbilita mill-Unjoni Ewropea waħed ha.
Fl-opinjoni tiegħi biex taxxa bħal din tkun effettiva jrid ikollha l-appoġġ tal-Istati Uniti u mexxejja oħrajn tal-G20 u mhux jekk titħaddem mill-Unjoni Ewropea waħedha.
Nemmen li f’livell ta’ Unjoni Ewropea għandna nevitaw li nadottaw xi ħaġa li tnaqqas il-kompetittività tagħna jew li xxekkel l-investiment, l-innovazzjoni u t-tkabbir ekonomiku. Ninsab imħasseb dwar il-fatt li finalment se jkun il-konsumatur li jkollu jagħmel tajjeb għall-ispiża tal-implimentazzjoni ta’ dak propost.
Jekk ma noqogħdux attenti, kull attentat biex nintaxxaw lill-banek jista’ jkun ifisser xejn iżjed minn taxxa oħra li trid titħallas mill-konsumatur.
Qabel naħsbu biex nikkonsidraw bis-serjetà l-implimentazzjoni ta’ taxxa fuq transazzjonijiet finanzjarji, għandu jkollna tweġibiet għal dawn il-mistoqsijiet kollha. Għandu wkoll ikun deċiż b’mod speċifiku x’se jkun l-għan li għalih jintużaw il-fondi miġburin.
Iffaċċjati minn ħafna għanijiet, għandna nenfasizzaw li kull għan għandu jkun trattat separatament u jagħmel użu minn strument wieħed għalih. Dan huwa prinċipju kardinali li nenfasizzaw fl-ekonomija.
Taxxa globali fuq transazzjonijiet finanzjarji tista’ tirnexxi biss jekk tkun iffokata, fattibbli, u jkollha appoġġ internazzjonali wiesgħa, u mhux jekk tittanta tkun l-affarijiet kollha f’daqqa għal kulħadd f’daqqa.
Diversi huma l-problemi kbar li qiegħda tħabbat wiċċha magħhom id-dinja. Hemm problemi li ilhom magħna, u huwa għajb li għadhom magħna, bħalma huwa l-faqar fost il-pajjiżi, u hemm problemi li tista’ ssejħilhom riċenti, bħalma huma dawk maħluqin mit-tibdil fil-klima. U hemm problemi li donnhom għandhom ċiklu, li jolqtuna kull tant żmien, bħalma hija l-kriżi finanzjarja, li din id-darba kienet waħda internazzjonali, u li l-effetti severi tagħha varjaw minn pajjiż għal ieħor, skont kemm il-pajjiż kellu riżorsi biex jilqagħlha.
“Pakkett problemi” li sab ruħu fl-iskaluni ta’ fuq nett tal-aġenda internazzjonali, preċiżament quddiem il-grupp magħruf bħala l-G20, li bħala grupp irid jara kif se jilqa’ għal dan kollu, b’mod partikolari biex jissalvagwardja l-ekonomija globali, u allura lill-pajjiżi kollha milquta. Fil-ġimgħat li għaddew bdejna naraw u niddiskutu f’livell ta’ Parlament Ewropew, proposti ta’ salvagwardja. Proposti li finalment bħal kull assiguraz zjoni jfissru finanzjament, u allura kif se jinġabru l-finanzi meħtieġa.
Proposta fuq dawn il-linji hija l-ħolqien ta’ taxxa fuq transazzjonijiet finanzjarji. Issa ilu numru ta’ ġimgħat sew li l-Parlament Ewropew, imlaqqa’ fi Strasbourg, iddibatta u adotta riżoluzzjoni li ressaq il-Kumitat għall-Affarijiet Ekonomiċi u Monetarji (ECON) li tat in-nifs lill-Unjoni Ewropea biex tiftiehem fuq pożizzjoni komuni dwar il-kwistjoni u tinnegozja mal-pajjiżi tal-G20 u mexxejja internazzjonali oħrajn, u biex il-Kummissjoni tħejji studju dwar l-impatt ta’ taxxa globali fuq transazzjonijiet finanzjarji, meqjusin il-vantaġġi u żvantaġġi potenzjali ta’ taxxa bħal din.
Kien il-kompitu tiegħi bħala Viċi-Ċermen tal-ECON li nressaq il-mozzjoni u mmexxi d-dibattitu Parlamentari dwarha. Fakkart kif 40 sena ilu, bħala student, parti mid-diskussjoni dwar l-Ordni Ekonomiku Internazzjonali Ġdid kienet dwar kif, dawk li kienu jissejħu SDRs (Special Drawing Rights), issirilhom xi forma ta’ taxxa fuqhom, imħallsa mill-gvernijiet, biex il-flus minnha jintużaw għall-programmi ta’ żvilupp f’pajjiżi fqar. Huwa fatt magħruf li dan il-ħsieb ma mmaterjalizzax.
Jista’ jkun li llum, b’riżultat tal-globalizzazzjoni, flimkien ma’ avvanzi teknoloġiċi u rieda politika akbar, ċerti pjani huma aktar fattibbli. Fl-istess ħin irid jingħad li żdiedet ukoll sewwa l-kompetittività fost l-għanijiet globali. Għalhekk wieħed irid joqgħod attent.
Hemm dik li tissejjaħ Tobin Tax, li taħseb għall-użu ta’ taxxa żgħira fuq transazzjonijiet finanzjarji, li d-dħul minnha jmur għal għajnuna ta’ żvilupp. F’Set tembru li għadda, fil-laqgħa tal-G20, kien hemm mexxejja politiċi li riedu li s-settur finanzjarju jħallas għal twaqqif ta’ fond ta’ stabilità u jipprovdi kumpens għall-ħsarat ikkawżati mill-kriżi finanzjarji lill-ekonomija dinjija.
Sadattant il-President tal-Unjoni Ewropea, Jose Manuel Barroso, issuġġerixxa l-introduzzjoni ta’ taxxa globali biex tiffinanzja proġetti ambjentali.
Dan kollu jeħodna lura għall-“pakkett problemi” li bdejt bih din il-kitba. Il-mistoq sija naturali hija: nistgħu verament nużaw taxxa waħda biex nilħqu dawn l-għanijiet differenti u f’daqqa?
Bħal kull munita oħra, din il-munita għandha żewġ uċuh. Hemm argumenti sodi favur taxxa fuq transazzjonijiet finanzjarji, u hemm riservi u mistoqsijiet daqstant ieħor sodi dwar kif jistgħu jinġabru l-fondi minn dawn it-taxxi; jekk l-ispiża tal-implimentazzjoni hux se tkun akbar mid-dħul innifsu; u min se jiddeċiedi kif jintużaw il-fondi miġburin.
Huwa eżattament għalhekk li r-riżoluzzjoni tal-ECON titlob għal studju dwar l-impatt minn tali taxxa proposta (li se jsir mill-IMF) biex ikunu jistgħu jitwieġbu numru sostanzjali ta’ mistoqsijiet.
Mistoqsijiet bħal kemm potenzjalment jista’ jkun id-dħul minn taxxa bħal din; x’effett ikollu fuq il-livell tal-prezzijiet; x’kienu l-esper jenzi minn taxxi simili preċedenti fejn jirrigwarda evitar ta’ ħlas ta’ taxxa u ċaqliq ta’ kapital jew servizzi; jekk taxxa tgħinx biex ikunu stabilizzati s-swieq finanzjarji; u, forsi l-aktar punt kruċjali, il-benefiċċji u l-iżvantaġġi li taxxa bħal din tkun stabbilita mill-Unjoni Ewropea waħed ha.
Fl-opinjoni tiegħi biex taxxa bħal din tkun effettiva jrid ikollha l-appoġġ tal-Istati Uniti u mexxejja oħrajn tal-G20 u mhux jekk titħaddem mill-Unjoni Ewropea waħedha.
Nemmen li f’livell ta’ Unjoni Ewropea għandna nevitaw li nadottaw xi ħaġa li tnaqqas il-kompetittività tagħna jew li xxekkel l-investiment, l-innovazzjoni u t-tkabbir ekonomiku. Ninsab imħasseb dwar il-fatt li finalment se jkun il-konsumatur li jkollu jagħmel tajjeb għall-ispiża tal-implimentazzjoni ta’ dak propost.
Jekk ma noqogħdux attenti, kull attentat biex nintaxxaw lill-banek jista’ jkun ifisser xejn iżjed minn taxxa oħra li trid titħallas mill-konsumatur.
Qabel naħsbu biex nikkonsidraw bis-serjetà l-implimentazzjoni ta’ taxxa fuq transazzjonijiet finanzjarji, għandu jkollna tweġibiet għal dawn il-mistoqsijiet kollha. Għandu wkoll ikun deċiż b’mod speċifiku x’se jkun l-għan li għalih jintużaw il-fondi miġburin.
Iffaċċjati minn ħafna għanijiet, għandna nenfasizzaw li kull għan għandu jkun trattat separatament u jagħmel użu minn strument wieħed għalih. Dan huwa prinċipju kardinali li nenfasizzaw fl-ekonomija.
Taxxa globali fuq transazzjonijiet finanzjarji tista’ tirnexxi biss jekk tkun iffokata, fattibbli, u jkollha appoġġ internazzjonali wiesgħa, u mhux jekk tittanta tkun l-affarijiet kollha f’daqqa għal kulħadd f’daqqa.
Can a global tax work?
The Times - Tuesday, 30th March 2010
An idea that has re-gained prominence as a result of the financial crisis is that of introducing a global tax on financial transactions. Several weeks ago in Strasbourg, the European Parliament debated and adopted a resolution tabled by the Economic and Monetary Affairs committee (Econ) giving the green light for the EU to agree a common position on the issue and negotiate with the G20 and other international leaders, and for the Commission to undertake an impact assessment of a global financial transaction tax looking at both its advantages and potential disadvantages.
Introducing the resolution and leading the parliamentary debate as vice-chairman of Econ, I spoke in plenary, noting that 40 years ago as a student, part of the New International Economic Order which we used to discuss, included a proposal to use special drawing rights (SDRs) loaned to the IMF to include a sort of tax on national governments which would be used for helping poor countries' development programmes. As we know, this did not materialise.
Many years later the effects of globalisation, combined with technological advancement and stronger political will, means that certain plans are now more doable. However, the number of competing global policy objectives has greatly increased. Alongside the original Tobin Tax idea of using a small financial transaction tax for development aid, some political leaders at the G20 summit last September called for the financial sector to pay for the establishment of stability funds and provide recompense for the damage caused by the financial crisis to the world economy. Meanwhile, President Jose Manuel Barroso has suggested the introduction of a global financial levy to fund environmental projects.
So, besides tackling poverty, we are now talking about using a financial transaction tax to combat the effects of climate change and to act as a sort of global insurance premium to compensate victims for the social and economic pain caused by financial crises. Can we really use one tax to achieve all these different aims?
Moreover, while there are many strong advocates of transaction taxes, there are also reservations and questions about how funds from it could be collected, whether revenues would be outweighed by the costs of implementing it, and over who would decide how the money was used.
That is why the Econ resolution called for an impact assessment on a transaction tax (being undertaken by the IMF) to provide answers to a range of questions such as: the revenue potential; how it would affect price levels; what the previous experiences of transaction taxes had shown in terms of tax avoidance or the migration of capital or services; whether a tax could help stabilise financial markets; and, crucially, the benefits and drawbacks of the EU going it alone in establishing a transaction tax.
From my point of view, it goes without saying that a transaction tax can only work effectively if it has support from the US and other world leaders in the G20, not by the EU going it alone. At EU level we should avoid any policy that would reduce our competitiveness or hamper investment, innovation and economic growth. I am also concerned that any extra costs borne by banks and other financial institutions in conducting financial transactions would simply be passed on to the end users.
If we are not careful, an attempt to apply a levy to banks could become yet another tax paid by consumers.
We need answers to all these questions before we can seriously entertain the implementation of a tax on financial transactions. We also need to decide on a specific purpose that the tax revenues would be used for. Faced with multiple policy objectives, we should stick to the wise rule that each objective needs its own separate instrument. A global financial transaction tax can only succeed if it is focused, achievable and commands widespread international support - not if it tries to be all things to all people.
An idea that has re-gained prominence as a result of the financial crisis is that of introducing a global tax on financial transactions. Several weeks ago in Strasbourg, the European Parliament debated and adopted a resolution tabled by the Economic and Monetary Affairs committee (Econ) giving the green light for the EU to agree a common position on the issue and negotiate with the G20 and other international leaders, and for the Commission to undertake an impact assessment of a global financial transaction tax looking at both its advantages and potential disadvantages.
Introducing the resolution and leading the parliamentary debate as vice-chairman of Econ, I spoke in plenary, noting that 40 years ago as a student, part of the New International Economic Order which we used to discuss, included a proposal to use special drawing rights (SDRs) loaned to the IMF to include a sort of tax on national governments which would be used for helping poor countries' development programmes. As we know, this did not materialise.
Many years later the effects of globalisation, combined with technological advancement and stronger political will, means that certain plans are now more doable. However, the number of competing global policy objectives has greatly increased. Alongside the original Tobin Tax idea of using a small financial transaction tax for development aid, some political leaders at the G20 summit last September called for the financial sector to pay for the establishment of stability funds and provide recompense for the damage caused by the financial crisis to the world economy. Meanwhile, President Jose Manuel Barroso has suggested the introduction of a global financial levy to fund environmental projects.
So, besides tackling poverty, we are now talking about using a financial transaction tax to combat the effects of climate change and to act as a sort of global insurance premium to compensate victims for the social and economic pain caused by financial crises. Can we really use one tax to achieve all these different aims?
Moreover, while there are many strong advocates of transaction taxes, there are also reservations and questions about how funds from it could be collected, whether revenues would be outweighed by the costs of implementing it, and over who would decide how the money was used.
That is why the Econ resolution called for an impact assessment on a transaction tax (being undertaken by the IMF) to provide answers to a range of questions such as: the revenue potential; how it would affect price levels; what the previous experiences of transaction taxes had shown in terms of tax avoidance or the migration of capital or services; whether a tax could help stabilise financial markets; and, crucially, the benefits and drawbacks of the EU going it alone in establishing a transaction tax.
From my point of view, it goes without saying that a transaction tax can only work effectively if it has support from the US and other world leaders in the G20, not by the EU going it alone. At EU level we should avoid any policy that would reduce our competitiveness or hamper investment, innovation and economic growth. I am also concerned that any extra costs borne by banks and other financial institutions in conducting financial transactions would simply be passed on to the end users.
If we are not careful, an attempt to apply a levy to banks could become yet another tax paid by consumers.
We need answers to all these questions before we can seriously entertain the implementation of a tax on financial transactions. We also need to decide on a specific purpose that the tax revenues would be used for. Faced with multiple policy objectives, we should stick to the wise rule that each objective needs its own separate instrument. A global financial transaction tax can only succeed if it is focused, achievable and commands widespread international support - not if it tries to be all things to all people.
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