French bankers back British PM’s Tobin tax jibe
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British Prime Minister David Cameron might be at odds with Nicolas Sarkozy over the French president’s proposed "Tobin tax" on financial transactions. But it seems some in the French trading community agree with him.
The very public slanging match between two of Europe’s leading statesmen continued apace this week with a row over taxes.
The days when British Prime Minister David Cameron and French President Nicolas Sarkozy exchanged congratulatory handshakes after uniting to help topple Libya’s Colonel Gadaffi are well and truly in the past.
The two leaders have been slugging it out since Cameron threatened to veto a Eurozone treaty in December and this week the war of words continued over Sarkozy’s plan to introduce a tax on financial transactions in France.
The French president plans to introduce a 0.1 percent levy on transactions from August 2012. Sarkozy wants to “create a shock” in Europe with his "Robin Hood" tax and believes other EU member states will be brave enough to follow suit.
Britain, it appears, will not be following the French lead after Cameron labelled the move both "mad" and "extraordinary". He said Britain would welcome French banks with open arms if they decided to up sticks and move abroad to avoid the duty.
France stuck in a corner
Those words might have provoked ire in the Elysée Palace but they will be received sympathetically among the French banking sector and the country’s economists.
“The tax is completely ineffective and even counter-productive,” French trader Eric Valatini told FRANCE 24. “Sarkozy’s hopes that other countries will follow is very optimistic.”
“At the moment Sarkozy’s proposition gives the impression that France is just a little Gaul village stuck in a corner all on its own,” he added.
The move to target the unpopular banking industry has been dismissed in some quarters as simply a political ploy to try to win support in the run up to April’s presidential election.
Sarkozy’s main rival in the vote, Socialist Party candidate François Hollande, also backs the tax and has vowed to introduce it if elected president.
Supporters of the levy believe it can generate vital income which will be used to balance budgets.
The UK argues that the tax would only work if it was introduced globally and not solely in the EU, where around two thirds of financial transactions take place in London.
“We hope the tax will generate one billion euros ($1.3bn, £0.8bn) of new income and thus cut our budget deficit,” said Sarkozy, announcing the proposals in front of TV audiences on Sunday.
Further details of the tax were not given although it has been reported it would target shares rather than bonds.
Foreign economies will benefit
Advocates of the measure hope it will put an end to excessive speculation but Mr Valatini disagrees.
“Within six months investors will have found a way to bypass the financial tax and will have created investment funds abroad for the French companies,” he said.
Professor Tomasz Michalski, an economist from HEC business school in Paris, agrees that French enterprises could be forced to move elsewhere.
“If you tax financial transactions then that activity will simply move elsewhere. Cameron is right about that. The finance industry is a very mobile industry,” said Prof Michalski.
“At a time when market conditions are rough this will only make those conditions worse for French companies. A company that wants to list itself on the French stock exchange might consider other places,” he added.
But Michalski said the idea of French banks like Société Générale and BNP packing up and moving their headquarters to London is fanciful.
Alasdair King, a financier in the City of London, was equally scathing of the Tobin tax.
"It must be appealing to Sarkozy as it is both a revenue-raising measure and a vote winner as he seeks re-election, but it will come at the expense of the long-term future of the French economy and its place in the global economy," he told FRANCE 24.
The British press have jumped on the latest rift between Sarkozy and Cameron with predictable reports referring to the demise of the Entente Cordiale.
As well as the disagreement over the financial tax, Cameron and Sarkozy also became embroiled in a tit for tat row this week over which country had the biggest industry.
But despite the ups and downs of their tempestuous relationship Cameron was at pains to suggest he and Sarkozy were not foes.
“I think he is a remarkable man,” he said. “I am full of admiration for Nicholas. Every now and again he says something I don’t agree with.”