Belmont Club

"A Bullet Aimed At the Heart of London"

“No taxation without representation”. The cry is familiar, except in this case it is s the Redcoats that are saying it as Germany sends the taxman to collect money from Britain to bail out the EU. The Daily Telegraph says the British Chancellor of the Exchequer responded to a German demand that Britain help pay for European solvency by saying “this is a bullet aimed at the heart of London”.

Europe’s plan for a financial transaction tax is “a bullet aimed at the heart of London”, Chancellor George Osborne warns today.

In his most outspoken rejection yet of the plan, he said it would be “economic suicide” for European countries to allow rivals such as China and the United States to undercut them. …

“The ideas of a tax on mobile financial transactions that did not include America or China would be economic suicide for Britain and for Europe. The EU should be coming forward with new ideas to promote growth, not undermine it”

“Europe certainly shouldn’t be creating new burdens,” he writes exclusively in today’s Evening Standard. “Proposals for a Europe-only Financial Transactions Tax are a bullet aimed at the heart of London. Even the European Commission admit that it would cost hundreds of thousands of jobs.”

The FTT has been proposed formally by Brussels to help raise money for a eurozone bailout, backed by France and Germany. A study by the commission claimed it would raise up to £35 billion in revenues and cut derivatives trading.

But despite the protests from Whitehall, the Germans were having none of it. Volker Kauder, the parliamentary leader of the Christian Democratic Union, said in a speech to the party congress in Leipzig that “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.” Bloomberg quotes a source who say that Britain and France are on a collision course and the onlookers are holding their collective breaths. Cameron is headed to Berlin on Friday to see if he can come to an agreement with Merkel.

“Germany and the U.K. are on a collision course,” Jan Techau, director of the Brussels-based European center of the Carnegie Endowment for International Peace, said in a phone interview. “The clashes we see now about deepening ties in the EU have always been there, but the crisis makes them more visible. Now it’s crunch time.” …

Speaking in London last night, Cameron laid out his opposition to German ideas, hours after Merkel had told the CDU conference that it’s time to push for closer political ties and tighter budget rules.

“We should look skeptically at grand plans and utopian visions; we’ve a right to ask what the European Union should and shouldn’t do,” Cameron said. Europe should be “outward- looking, with its eyes to the world, not gazing inwards” and should have “the flexibility of a network, not the rigidity of a bloc,” he said….

“In all the figures that we bandy around about the financial-transactions tax, it is worth bearing in mind the fact that around 80 percent of it would be raised from businesses in the United Kingdom,” Cameron told the House of Commons Nov. 7. “I am sometimes tempted to ask the French whether they would like a cheese tax.”

In the meantime Italian bonds topped the 7% mark again on Tuesday, even after a new prime minister succeeded Silvio Berlusconi. “Experts believe that the jump in Italy’s borrowing costs was prompted by concerns over recent political developments and doubts about the country’s ability to repay loans without foreign help. It is now feared that Italy may be forced to seek a rescue, but the economy is widely seen as “too big to bail.” Italy’s sovereign debt is estimated at EUR 1.9 trillion ($2.7 trillion).”

As the money dwindles, Europe looks harder and harder for a way to keep the EU going. Today a Tobin tax on the City of London is being considered. But that hardly seems enough. Tomorrow, who knows what?

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