Courting ATTAC?

Johannes Schneider Johannes.Schneider at
Wed Sep 5 03:43:23 MDT 2001

The piece below is from the Financial Times webpage. I am not sure, what to
make out of it, but I tend to agree with the last paragraph. Any comments?

Schröder calls for debate on currency speculation
By Haig Simonian in Berlin and Tony Barber in Frankfurt
Published: September 4 2001 18:48GMT | Last Updated: September 4 2001

Chancellor Gerhard Schröder has called for Germany and France to lead a
debate on speculative international capital flows, thereby putting one of
the main demands of the anti-globalisation movement on the European
political agenda.

Speaking on the eve of an informal dinner in Berlin on Wednesday night with
French president Jacques Chirac and premier Lionel Jospin, Mr Schröder said
there was a need to recognise "weak spots" in the international financial
system, such as offshore centres, hedge funds and derivatives.

"So I want to discuss with our European and especially French partners how
we can react to these relatively autonomous speculative financial flows," he
said. The chancellor stopped short of supporting Mr Jospin's recent espousal
of the so-called "Tobin tax". The tax, proposed by James Tobin, the American
economic Nobel laureate, would put a levy on turnover in currency markets.
The anti-globalisation movement has suggested the proceeds of such a tax
could be used for global poverty relief.

Addressing an international economic conference organised by his Social
Democratic party, Mr Schröder noted serious shortcomings with the Tobin tax.
"For example, how do you distinguish speculative financial flows from those
related to genuine trade finance?" he asked.

But the chancellor's comments, ahead of a meeting of EU finance ministers in
Belgium and a separate gathering of Social Democratic leaders in Sweden this
month, marked an important shift in Germany's willingness to recognise the
objections of the anti-globalisation movement.

Describing the Tobin tax as one of many instruments which could be used, Mr
Schröder said such issues needed to be discussed by Europe's finance
ministers "with all clarity".

Only last week, Hans Eichel, the finance minister, rejected the Tobin tax on
practical grounds at a meeting with Laurent Fabius, his French opposite

Mr Schröder's remarks also contrasted with criticisms from Ernst Welteke,
the Bundesbank president.

In a speech prepared for delivery on Tuesday in Dublin, Mr Welteke said the
Tobin tax would come at too high a cost. "Foreign trade in goods and
services is bound to suffer as well. In the end, the wealth-enhancing
international division of labour will be hampered."

Mr Welteke said that, in times of economic distress, a Tobin tax would be
ineffective because profits from speculative capital movements would far
outweigh the cost of any sensible tax on transactions.

He also praised the increasing integration and liquidity of world financial
markets, saying this made them more attractive to international investors.

Mr Welteke made clear the Bundesbank regarded any attempt by governments to
"throw sand in the wheels of the foreign exchange market" as unrealistic.

The chancellor's remarks - and notably his clear distinction between
collectivist European social values and the more individualistic US ethos -
were also in line with his markedly greater emphasis on social issues of
late. With national elections only a year away, such themes, geared to the
SPD's core centre left supporters, have become increasingly prominent in
recent speeches.

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