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16 November 2011

It’s Britain vs Germany on the Robin Hood tax

Merkel ally warns that Britain will not "get away with" opposition to a transactions tax.

By George Eaton

“A bullet aimed at the heart of London”. That was the vivid language used by George Osborne to denounce proposals for a Europe-only financial transactions tax (better known as the Tobin tax or the Robin Hood tax), warning that it would be “economic suicide” for the EU to impose the levy unilaterally. And, to put it mildly, his comments haven’t been well received by Germany.

Volker Kauder, the parliamentary leader of the ruling Christian Democrats, told his party’s congress:

I can understand that the British don’t want that when they generate almost 30 per cent of their gross domestic product from financial-market business in the City of London.

But Britain also carries responsibility for making Europe a success. Only being after their own benefit and refusing to contribute is not the message we’re letting the British get away with.

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Why, you may ask, are two notional conservatives so at odds with each other? In the case of Kauder, the answer is simple: revenue. It’s thought that a Tobin tax could raise up to £35bn for a eurozone bailout. For this reason, Angela Merkel is determined to push ahead with the tax even if agreement with the US and China can’t be reached.

In the case of Osborne, the answer is finance. The Chancellor is determined to veto anything that threatens London’s status as a global financial centre. Indeed, a recent City AM report suggested that Osborne is minded to oppose a transactions tax even if it is applied internationally. In a private letter to bank chiefs, the Chancellor wrote: “I agree there would need to be further discussions about whether any FTT model offers an efficient mechanism to raise revenue.” All of which suggests that Friday’s meeting between David Cameron and Merkel in Berlin could be the testiest for some time.

Incidentally, Kauder’s comments on the EU’s political direction were just as notable. He declared:

Now all of a sudden, Europe is speaking German. Not as a language, but in its acceptance of the instruments for which Angela Merkel has fought so hard, and with success in the end.

His phrase of choice (“Europe is speaking German”) has prompted a typical burst of Germanophobia from the Daily Mail.