In a letter to the FT, Raeburn writes that it is important that the 11 EU countries involved do not lose sight of the importance of international trade and investing; they must reflect on the core principle in the EU treaty, the prohibition of any restriction on the free movement of capital.
It is clear that the proposed FTT does indeed create restrictions on the movement of capital. In the case of foreign exchange, there is well documented independent research showing how dramatically transaction costs will increase for corporates and investors using foreign exchange to mitigate underlying risk – and incidentally thereby contributing to financial and economic stability.
These increases in costs are in the order of hundreds of percentage points. Such a profound change in the cost of managing risk surely creates a very clear restriction, with its impact extending to all Member States and not just to the 11 that advocate FTT through the enhanced cooperation process.
As a result of an FTT implementation, corporates and investors will think very carefully about where and how they do business.
The Treaty on the Functioning of the EU is a central plank for European harmonisation; politically-driven attempts to ride roughshod over it should be resisted.
Full letter (subscription)
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