danivon wrote:There is likely to be a proposal soon on treaty changes, which I think is likely to mean more integration within the Eurozone.

Presumably this would have to be put to a vote. Do you think it will be more successful the the recent failed votes on a European Constitution? Or is it going to be more of a governmental decision, i.e. the proposal comes out and the various national governments agree to the changes without putting it to a popular vote?

When it comes to the recent failed votes, they ended up being bypassed on the second go, and a large part of the provisions were approved. All national parliaments ratified those.

Whether that method can be used again, or whether it requires proper treaty changes (which would require referendums in several countries) depends what the proposals are. It may be that the proposal only covers the 17 Eurozone countries, rather than the full 27 EU.

Would it go through in national referendums? I don't know. Depends largely on what the proposals are and whether people see them as necessary or risky. The UK would likely vote against in any EU-based referendum, but we don't have to have one legally and while the government has promised to hold one if there are treaty changes, I'm not 100% convinced they would not renege in particular circumstances (eg: if the effects only cover the EZ17).

Referendum is a dirty word in Brussels, they'll strain every sinew to avoid having to hold one in any country.

danivon wrote:Well, they'd be stupid not to put contingencies in place, given that there have been riots in Greece already.

The line that caught my eye was this one: "Britain is now planning on the basis that a euro collapse is now just a matter of time." That strikes me as a bit stronger than simply prudent planning for an unlikely contingency, eh?

To be honest, I've been less than impressed by the UK government on this, with public pronouncements that are not really helpful, and saying that they would back a transaction tax in principle (following Archbishop commentary) before coming out as dead set against it when the Europeans put it forward.

You seem to be assuming that the UK government does not want the Euro to fail. I'm not sure that's necessarily accurate. While a collapse would probably be bad for Britain, there's at least an argument to be made that the UK might benefit from an orderly dismantling of the common currency (especially if your government sees a failure of the Euro as inevitable, pushing it over a gentle slope may be better than leaving it to fall off a cliff).

The European Tobin tax proposal deserves to be killed at birth. Something like 85% of the revenue it generates is expected to come from Britain and yet all of the funds would go towards propping up the Euro. It effectively amounts to a British bailout of the Eurozone on a colossal scale. Or rather, in theory it does, in practice much of that money would never materialise because unless a Tobin tax is applied globally then a vast amount of financial business would simply move to a jurisdiction that doesn't levy it, taking approximately 10% of our current tax base with it. The British government position on this is 100% correct for British interests, it would be an unmitigated disaster for Britain if not applied globally.

As a side note btw, I love how all the Guardian types insist on describing it as the 'Robin Hood tax', as if this is an any way an attempt to take from the rich and give to the poor. in practice it's simply a way of taking from everybody's pension funds and giving back to the banks as interest payments on existing public sector debt in the Eurozone. Do people honestly think that the costs of this new wondertax will be borne by the bankers ? I really can't believe that so many earnest bank-hating lefties have been taken in by this idea, which essentially amounts to a cunning ruse to bail out the Eurozone by raiding the pensions opf every worker in Europe.

Machiavelli wrote:

danivon wrote:Well, they'd be stupid not to put contingencies in place, given that there have been riots in Greece already.

The line that caught my eye was this one: "Britain is now planning on the basis that a euro collapse is now just a matter of time." That strikes me as a bit stronger than simply prudent planning for an unlikely contingency, eh?

And that line is one from a journalist, and so should be regarded as opinion rather than copper-bottomed fact.

You seem to be assuming that the UK government does not want the Euro to fail. I'm not sure that's necessarily accurate. While a collapse would probably be bad for Britain, there's at least an argument to be made that the UK might benefit from an orderly dismantling of the common currency (especially if your government sees a failure of the Euro as inevitable, pushing it over a gentle slope may be better than leaving it to fall off a cliff).

If it appears that the UK helped to 'push' the Euro, I doubt that we'd be forgiven for it by our neighbours for decades. Especially if we seem to benefit as a result.

If that is indeed the intent of our government, they are more stupid than I thought.

Sassenach wrote:The European Tobin tax proposal deserves to be killed at birth. Something like 85% of the revenue it generates is expected to come from Britain and yet all of the funds would go towards propping up the Euro.

Given that our City is not just servicing (and benefiting) our own economy, but that of Europe at large and the world, I'm not sure that this is actually a massive problem.

It effectively amounts to a British bailout of the Eurozone on a colossal scale. Or rather, in theory it does, in practice much of that money would never materialise because unless a Tobin tax is applied globally then a vast amount of financial business would simply move to a jurisdiction that doesn't levy it, taking approximately 10% of our current tax base with it. The British government position on this is 100% correct for British interests, it would be an unmitigated disaster for Britain if not applied globally.

I do find these scary stories about bankers leaving in droves to be quite funny. We had them with the bonus tax in 2009. Result? barely a trickle. Perhaps some would leave, but where would they go? And how would they operate in the markets of Europe if they completely absented themselves?
And if some did leave(not all of them, let's not be ridiculous), would it be really that much of a disaster? We've had a national debate about the 'balance' of the UK economy in the wake of 2008. The financial sector took us down and is much bigger than it used to be. Manufacturing is down and is not being helped by our own financial sector - a sector less interested in the 'hinterland' lying outside London that it was because it has become a world hub. Even New York is more concerned with US industry that the rest of the world. If it's national self-interest that we want from our government, perhaps they could impress that upon their mates in the City?

Getting a 100% global tax of this nature is impossible in one step. It's more likely to come about over time with different regions applying it. That way, if it doesn't work it can be undone, and if it works, other jurisdictions could well apply it

As a side note btw, I love how all the Guardian types insist on describing it as the 'Robin Hood tax', as if this is an any way an attempt to take from the rich and give to the poor. in practice it's simply a way of taking from everybody's pension funds and giving back to the banks as interest payments on existing public sector debt in the Eurozone. Do people honestly think that the costs of this new wondertax will be borne by the bankers ? I really can't believe that so many earnest bank-hating lefties have been taken in by this idea, which essentially amounts to a cunning ruse to bail out the Eurozone by raiding the pensions opf every worker in Europe.

I prefer Tobin, or 'transaction', even if I do read the Guardian (don't you as well?).

Of course it can be targeted to apply to speculative transfers over a certain volume rather than normal ones. While it's true that banks will want to pass on the costs, they are also subject to regulation which could (if the regulator is given the teeth) stop the effect being too traumatic. The level of the tax is very very low - of the order of a fraction of 1%. Of course there is also the effect that could arise - fewer speculative transfers, which may not be a bad thing either, given that it was partly these that helped turn the sub-prime crisis into a major disaster.

Given that our City is not just servicing (and benefiting) our own economy, but that of Europe at large and the world, I'm not sure that this is actually a massive problem.

It's still a tax that disproportionately affects Britain, despite the fact that we're not even members of the Euro. Of course it's proving to be popular in Germany, France and elsewhere, they don't stand to lose very much if it goes wrong and they have a huge amount to gain. If we actually got to keep the money raised by a Tobin tax then I wouldn't object so much, but what's being proposed is a direct transfer of cash from Britain to bail out the Euro. As Vince Cable said on tv the other night "of course we're not going to fall for that".

I do find these scary stories about bankers leaving in droves to be quite funny. We had them with the bonus tax in 2009. Result? barely a trickle. Perhaps some would leave, but where would they go? And how would they operate in the markets of Europe if they completely absented themselves?

This is entirely different. The bonus tax was a tax upon the incomes of individual bankers, a Tobin tax would be a tax upon the institutions themselves. It would be comparatively simple to route financial transactions through somewhere in Asia or the US in order to avoid the tax. I'm not suggesting that all of the banks would up sticks and leave, but the less business they do in Britain the less tax revenue we derive from their activities. It's a massive risk to take when we're not even standing to gain from the Tobin revenues.

And if some did leave(not all of them, let's not be ridiculous), would it be really that much of a disaster? We've had a national debate about the 'balance' of the UK economy in the wake of 2008. The financial sector took us down and is much bigger than it used to be. Manufacturing is down and is not being helped by our own financial sector - a sector less interested in the 'hinterland' lying outside London that it was because it has become a world hub. Even New York is more concerned with US industry that the rest of the world. If it's national self-interest that we want from our government, perhaps they could impress that upon their mates in the City?

Sure, it would be great if we could rebalance the economy away from the financial sector, but it's not like we could just drive out the bankers and instantly see a flourishing manufacturing sector spring up to take its place. The reality would be that the manufacturing sector would be largely unaffected but the financial sector would shrink and so would UK government revenues. Rebalancing the economy will take a long time and will need to be carefully handled.

Getting a 100% global tax of this nature is impossible in one step. It's more likely to come about over time with different regions applying it. That way, if it doesn't work it can be undone, and if it works, other jurisdictions could well apply it

At the very least it will need the major financial centres on board. Europe going it alone will be a recipe for disaster.

I prefer Tobin, or 'transaction', even if I do read the Guardian (don't you as well?).

Yes, I read the Guardian. i wasn't referring to everybody who reads it with that remark, just to the large number of people writing columns there who keep wheeling out that phrase week after week.

I do take your point about wanting a mechanism for restricting speculative transfers. And who knows, maybe it really would work that way and prove to be a good thing. I just tend to think that unless it's applied globally, or at least applied in all the major financial centres, then it won;t achieve anything of the sort. While it may only be a very low tax level, when you aggregate it over millions of transactions it could add up to a hefty amount of cash. They do after all envisage raising billions from this every year, which is billions that won't be adding to bank profits unless they find a way to pass that cost onto their customers. Banks will look for any way they can to avoid having to pay that tax, and if it only applies in Europe then various other financial centres will be only too eager to offer incentives to lure business away

danivon wrote:And that line is one from a journalist, and so should be regarded as opinion rather than copper-bottomed fact.

Actually, that line is attributed to one of your "Senior Ministers", though it is not in quotes, so I suppose it is a paraphrase.

If that is indeed the intent of our government, they are more stupid than I thought.

Whatever their intent, I reckon it's a safe bet that they are more stupid than you thought.

Hold on to your hat, Dan. Rumors on the Street have it that Britain will be the next in the bond market's barrel. The UK has one of the highest debt to GDP ratios in the world (151% as of last May), so it will be interesting to see how long it can sustain the sort of yields our friends in Italy have been paying. Of course, the UK can always further debase its currency--which will take care of its existing Stirling denominated debt at the cost of devaluing the savings of its citizens--but doing so will make it even harder for it to borrow in future. If you head down that path, you end up with a forcibly balanced budget pretty quickly (just ask Argentina).

That ratio 151% is BS. It's about half that. What people are doing is adding future revenue spending as if it's a current debt, which may give the picture of future debt/GDP ratios if nothing changes, but is not the true picture.

What I would say, however, is that out government's Austerity programme has been tested and found wanting. We have inflation at about 5%, low growth (lower than EZ and USA), increasing unemployment, and the deficit is likely to grow to a higher level than it would have under the 'profligate' Labour government. So I'm not really surprised that people are looking a little askance at us after the OBR report today.

So far, our bond rates have been among the lowest of all, so let's just wait and see, eh?

Might not be a terrible time to fill the old pantry with canned goods, though. We'll send you care packages if things really get rough (assuming the post is still working and we're not in the same soup ourselves), but it's always good to have an emergency stash...just in case. ;)

Ta for the offer, but it looks like the Fed is sending a large care package over.

Indeed. That should be worth about two weeks of relief. May even take us through Christmas. Then everyone will wake up and realize that there's no point in bailing if you haven't fixed the gigantic hole below the waterline.

Central banks in Europe buying printing presses. Wonder why that could be....