The union is in a state

The union is in a state, but it doesn't have to be. Time to think again about FTT

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Barroso struggling to keep his head above water
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Anthony Pickles
On 13 September 2012 14:17

“The State of the Union Address”. Strasbourg, September 2012.

No, this isn’t Obama going to address Congress. This is Jose Manuel Barosso, the former Maoist President of the European Commission going to Strasbourg to address MEPs on the state of the European Union. Maybe the “Union is in a State” would perhaps be a better name for the speech.

The headlines focus on his comments about the need for the EU to move towards being a “federation”, whatever that means. He said; "[Europe needs to] move toward a federation of nation states that involves shared sovereignty, drawing a distinction between that and a ‘superstate’”.

The European Commission also wants to introduce the Robin Hood tax across the European Union by 2014. The tax would mean that 0.01 percent would be levied upon all transactions made within the EU. Those in favour, like the European Commission say that this is a “tiny tax” which would help create jobs and combat climate change. It would in fact do the complete opposite.

Over 80 percent of the financial transactions of the European Union happen in the UK. This tax would overwhelmingly put our country at a disadvantage. In the 1980s, Sweden introduced a similar tax on its financial services following its banking crisis. The Swedish Finance Minister, Anders Borg said that Sweden was forced to abandon the tax after almost all of the country’s traders left the country.

“Between 90 and 99 percent of traders in bonds, equities and derivatives moved from Stockholm to London”, said Borg.

With this stark historical reference in mind, and the sheer frequency of transactions that take place in the UK, it would be a catastrophic mistake to think that the introduction of this tax would do anything other than destroy jobs.

David Cameron and George Osborne have both said that the introduction of a financial transaction tax could only happen if it were to be introduced globally. In today’s truly global world, this is the right approach; to simply regionalise a tax is at best naïve and at worst dangerous to our prosperity.

The World Economy is growing. Despite headlines in the West showing the worst economic climate since the great depression, in the year 2000, the world economy was worth an estimated $30 trillion. In 2012 it was estimated to be worth $70 trillion. These figures do not demonstrate a global problem of growth, quite the contrary. What they outline is that growth is not in the West, or in Europe, it is in the East. All Western economies need to do more to adapt to this changing reality.

Taxes which attack prosperity, like the Financial Transaction Tax, quite simply show that we’re closed for business.

The 2012 “State of the Union” address in Strasbourg showed nothing other than naval gazing. The EU does have the potential to get out of its crisis, by becoming more competitive, not by nation building, or making trade more difficult. At a time when the world economy is more interconnected than ever, why are our European elites so determined to regionalise?

The union is in a state, but it doesn’t have to be.

Follow Anthony Pickles on Twitter @AntPickles

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