Bank of France’s Governor Attacks Planned Tobin Tax

Europe’s plans for a 
financial transaction tax (FTT),
also dubbed the ‘Robin Hood tax’ poses “an enormous risk” to the countries that support its introduction and could threaten financial stability, according to Christian Noyer the governor of the Banque de France.

In an interview with business daily the
Financial Times
, Noyer is critical of the European Commission’s (EC) proposed FTT across 11 eurozone countries, aimed at raising €35bn, commenting: “The commission’s draft is a non-starter and needs to be entirely revised.”

“I do not believe it was ever the intention of the French government to do something that would trigger the destruction of entire sections of the French financial industry, trigger a massive offshoring of jobs and so damage the economy as a whole,” Noyer adds.

Moreover, the commission’s proposals posed “an enormous risk in terms of the reduction of output in the FTT jurisdiction; increased cost of capital for governments and corporates; a significant relocation of trading activities and decreased liquidity in the markets,” he suggested.

Noyer’s comments mark a departure pursued for many years by successive French governments, which have been among the strongest supporters of a Europe-wide FTT . However, in recent months the socialist administration of president François Hollande has responded to pressure from the financial sector and argued for watering down Brussels’ proposals.

Noyer, who is also a member of the governing council of the European Central Bank (ECB), told the FT: “The most important concern for the central banks [is] the risk of the total drying up of repo markets. That means the transmission of our monetary policy would be seriously impaired and the risk in terms of financial stability would not be negligible.”

The eurozone FTT – also dubbed the ‘Tobin tax’ as US economist James Tobin initially proposed the idea – was originally due to take effect in 2014 but its introduction has been delayed by wrangling over its form and scope. Other critics of the FTT include
Jens Weidmann
, president of the Deutsche Bundesbank.

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