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The Mayor of London, Boris Johnson has written to European Commission President, José Manuel Barroso, to warn him that the introduction of a 'financial transactions tax ' across EU member states would drive business to financial centres outside the union and damage its economy. He has urged the President to drop the proposals at the earliest opportunity

 

He is particularly concerned with the negative impact of the tax on economic growth and jobs in London, Europe's most successful financial services centre, but also about the wider effects on reducing growth across Europe. All EU countries would suffer job losses in the long term as the financial sector and related sectors such as accountancy and law employ up to 10 million Europeans. The European Commission's own estimates show that imposing the tax would reduce Europe's GDP by at least 0.5 per cent and possibly as much as 1.8 per cent.

The Mayor also believes that the impact of the tax will not just be limited to the financial services sector and related industries, but will hit EU business and its citizens too with higher borrowing costs and decreased pension fund values.

Whilst the Mayor agrees with the need for reform he would only consider supporting the tax if it were adopted globally - which is unlikely given the strong opposition from the United States. He calls on the EU to explore alternative reform measures which support strong and sustainable economic growth in the EU.

The Mayor of London, Boris Johnson, said:

"At a time when many EU member economies are struggling, some on their knees, it would be madness to weigh them down with this new mill stone. Apart from weakening its financial sectors and London's in particular, it will hamper the ability of businesses across Europe to compete in the global market and have serious implications for EU jobs.

"These proposals should be dropped immediately and energy directed towards designing sensible reforms which also support and promote the EU's financial services sectors and the growth of member states' economies."

The European Commission’s own impact assessment found that the Financial Transactions Tax will lead to higher transaction costs, lower asset prices and an increase in the cost of capital.

Source: London Mayor

Written by Scott Buckler
Friday, 28 October 2011 10:10

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