ECB Draghi: Financial Trans. Tax Would Benefit Speculators

BRUSSELS (MNI) -European Central Bank President Mario Draghi said
Wednesday that taxing financial transactions in Europe risked driving
trading to the shadow banking sector, boosting speculators’ profits and
keeping out foreign investors.

“For an FTT (Financial Transaction Tax) to be practical it has to
be undertaken by all countries because otherwise it would have a
displacement of industry to countries which don’t have such a tax, or,
which would be even worse, a displacement from the industry to the
shadow banking sector,” Draghi told members of the European Parliament’s
Economic and Monetary Affairs Committee.

Because taxes reduce market efficiency, taxing financial
transactions risk creating greater volatility and this would “increase
the gains from speculation,” Draghi said.

Acknowledging that the ECB had no formal competence in fiscal
policy, Draghi nevertheless warned that taxing financial transactions in
Europe could make Europe less attractive to foreign investors.

“Most of the foreign investors” have largely stopped investing in
the euro area Draghi said. “We want them to come back. One wonders if an
FTT is the best way to attract them back to euro area.”

The European Commission, France, Germany and Italy are eager for
the EU to impose a 0.1% tax on trading in shares and bonds and 0.01% tax
on derivatives, but the UK, Sweden and the Netherlands oppose the idea,
which requires unanimity amongst EU governments. France, hoping to lead
the way, has already enacted such a tax.

–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com

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