While the move will inevitably benefit the financial services sectors of each of the six 'FTT free’ euro states (Ireland, Luxembourg, Netherlands, Finland, Malta, and Cyprus) it also has raised concerns about further fragmentation in the single EU (27 member) financial market.
Already, there are increased concerns over anti-single market measures being introduced by Brussels, for example in the investment funds area, aired for example at the recent IFIA annual conference in Dublin (by the IFSC Ireland chairman, William Slattery).
The move has prompted consternation in financial services firms within the eurozone. With the tax, the liquidity of the Vienna stock exchange would ‘dramatically decrease,’ said Michael Buhl, joint chief executive of CEE Stock Exchange Group, which owns the Austrian Bourse. The Frankfurt-based Deutsche Borse said in a statement ‘the tax will create an environment that practically encourages regulatory arbitrage’.
The decision by Germany, along with France to push through the tax reflects pressure on Chancellor Angela Merkel from the Opposition SPD, and her own former Finance Minister, and former coalition partner, Peer Steinbruck. His party has separately proposed other measures that penalise the financial sector, notably universal banking, bitterly opposed by Paul Achleitner, supervisory board chairman of Deutsche Bank, as inimical to the corporate banking system in Germany, a foundation of the country’s small and medium sized business economy.
Germany and France have been joined by a group of mostly peripheral European nations (all in the eurozone) which include Greece, Portugal, Spain, Italy, Belgium, Slovakia, Estonia, Austria, and Slovenia, countries largely with less developed international financial services sectors and tending to have high budget deficits.
The 11 country move represents a failure by proponents of the tax to convince a majority of the 27 EU member states to adopt the proposal, an idea first floated by Keynesian economist James Tobin in the 1970s, and resurrected regularly since then but disregarded widely amongst markets-oriented economists ever since. It had already been rejected by the US Government, and by the UK, and foremost Asian and Middle East countries.