From the TUC

What a Robin Hood Tax could do for Greece

09 May 2010, by in Economics, International

The crisis facing Greece is likely to spread, so it’s in everyone’s interests to follow this unfolding tragedy. The TUC supports our colleagues in the Greek trade union movement, and the statements of the European Trade Union Confederation (ETUC) – and needless to say, we condemn the actions which led to the deaths of three people in a Greek bank last week. But the debate in Germany is a lot more concrete than in the UK because they’re part of the Eurozone, so it’s interesting to note that the debate in the German Parliament went far further than discussing sovereign debt and cuts in public services. The opposition social democrats (SPD, sister party of the UK Labour Party) abstained on the rescue package that Chancellor Angela Merkel proposed, because it didn’t include a financial transactions tax.

The SPD argued that, as well as providing guarantees for the loans that the Greek government desperately needs, we need to sort out the longer term aspects of Greece’s crisis. At the moment, the only option on the table is that the Greek government needs to cut spending – which will hit the poorest Greeks hardest, and leave those in the money markets speculating on Greece’s sovereign debts with a big, fat profit. The Greek trade union movement have advocated a different solution – not least, making sure the rich pay the taxes they are legally required to! But the German SPD advocate more radical tax solutions – they are calling for a Financial Transactions Tax (FTT – what we call the Robin Hood Tax in the UK) to meet the real economy costs of the crisis. Joachim Poss, deputy leader of the SPD parliamentary party, told ZDF television that “‘Mrs Merkel must boost her credibility in fighting speculation and for an effective financial transaction tax in Europe”.

In the Bundestag debate last week, the SPD was joined in advocating an FTT by the Green Party and the Left Party, although the Greens voted for the package and the Left against. Indeed, even CDU Chancellor Angela Merkel supports an FTT, but could not get it included in the German rescue package because of the opposition of her coalition partners, the ultra-liberal Free Democratic Party (FDP).

4 Responses to What a Robin Hood Tax could do for Greece

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  2. Tim Worstall
    May 12th 2010, 12:45 pm

    “and leave those in the money markets speculating on Greece’s sovereign debts with a big, fat profit.”

    No, impossible. Speculation, like derivatives, is a zero sum game. For every profit there must be a loss. For example, there might be those who would win from having bought CDSs. But their gains will be exactly offset by those losses of those who wrote them. And those who wrote them are speculating upon Greece’s soveriegn debts just as much as those who bought them.

  3. Owen Tudor

    Owen Tudor
    May 12th 2010, 1:34 pm

    Tim, we agree. I should have said “some” in the money markets. The ones who bet and won are reprehensible and without defence – the ones who bet and lost at least get some pity. But overall, I’d prefer it if they all just stopped doing it – it doesn’t benefit anyone in the long term.

  4. Tim Worstall
    May 12th 2010, 3:15 pm

    “But overall, I’d prefer it if they all just stopped doing it – it doesn’t benefit anyone in the long term.”

    Be careful what you wish for. Those who bought the basic debt were speculating too: that Greece would pay them back (as we’ve seen , no sure thing….and Greece has been in default on its Govt debt for 50% of its time in existence as an independent nation).

    If people won’t at least speculate on that then there’s no market in govt debt and no govt can ever run a budget deficit.

    What you really mean is “don’t speculate on what I think you shouldn’t speculate on” but enshrining that detailed description into law is the tough part.