By Maximilian Clarke
An EU-wide tax on financial transactions ‘would be madness’, driving crucial financial trade beyond the bloc’s borders at a time we need it mose, London’s mayor Boris Johnson today wrote in a letter to EU president, Jose Manuel Barroso.
The Mayor’s pleas echo the findings of an Adam Smith Institute report which conclded that such a tax would be ‘economic suicide’.
Johnson is said to be particularly concerned with the negative impact of the tax on economic growth and jobs in London, Europe's most successful financial services centre, but also about the wider effects on reducing growth across Europe. All EU countries would suffer job losses in the long term as the financial sector and related sectors such as accountancy and law employ up to 10 million Europeans. The European Commission's own estimates show that imposing the tax would reduce Europe's GDP by at least 0.5 per cent and possibly as much as 1.8 per cent.
"At a time when many EU member economies are struggling, some on their knees, it would be madness to weigh them down with this new mill stone,” said Mayor Johnson. “Apart from weakening its financial sectors and London's in particular, it will hamper the ability of businesses across Europe to compete in the global market and have serious implications for EU jobs.
"These proposals should be dropped immediately and energy directed towards designing sensible reforms which also support and promote the EU's financial services sectors and the growth of member states' economies."
The European Commission’s own impact assessment found that the Financial Transactions Tax will lead to higher transaction costs, lower asset prices and an increase in the cost of capital.
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