EU Transaction Tax Would Sap Markets of Liquidity, Borg Warns
Anders Borg, Sweden's finance minister
Linus Hook/Bloomberg
Anders Borg, Sweden's finance minister.
Anders Borg, Sweden's finance minister. Photographer: Linus Hook/Bloomberg
Sept. 7 (Bloomberg) -- Swedish Finance Minister Anders Borg talks about European Union efforts to tighten national budget deficit controls and the prospects for a proposed transaction tax on financial institutions. He speaks with Francine Lacqua in Brussels on Bloomberg Television's "Countdown" before a meeting of EU finance ministers. (Source: Bloomberg)
European financial regulators should use a banking levy to control financial markets instead of a transaction tax to keep markets liquid and protect government revenue, Swedish Finance Minister Anders Borg said.
European Union finance ministers are in Brussels today to decide what measures to impose to improve national budget management within the bloc and how to curtail market turmoil through stricter regulation.
Sweden attempted a transaction tax and “basically, our futures trading, our bond trading and our stock trading to a large extent just moved to London,” Borg said in an interview with Francine Lacqua on Bloomberg TV’s Countdown program before the meeting. “If we would introduce a unilateral European system, it’s quite likely the trading will move to the U.S. or Switzerland. It’s not a system that can work actually.”
Borg said there’s “a lot” of opposition to a transaction tax, which will “increase the risks and make the markets less liquid.” Such a measure is “quite likely to reduce our public revenues because we will lose in capital gains taxes and if the trading moves elsewhere, the taxes will also move elsewhere. If we want to protect our public finances, we should go for a banking levy rather than a transaction tax.”
Borg’s Caution
The euro has rallied as concern recedes that Greece’s fiscal crisis may lead to a breakup of the bloc and after Germany, the region’s biggest economy, grew at the fastest quarterly pace since reunification.
Even so, Borg urged caution.
“I hope we’re not getting close to a double dip recession but obviously we’re not out of the woods yet,” he said. “We could see the problems in Greece or Spain coming back to the agenda. And that’s a very strong reason to act now.”
The European currency is up 7 percent since a June trough. Germany has warned that the economic rebound is slowing a push for tougher sanctions on the EU’s biggest fiscal sinners.
“It’s a little frustrating” that an overhaul of EU policy is taking so long, Borg said. “It’s absolutely necessary to regain credibility for policy in Europe that we strengthen the system. So we cannot accept watering down. We need to go further than has been discussed. The problem is that it has been taking too long.”
The euro dropped 0.9 percent to $1.2756 as of 9:31 a.m. in London from $1.2876 in New York yesterday.
To contact the reporter on this story: Chris Kirkham in London at ckirkham@bloomberg.net
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