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José Luis Álvarez Arce, Director of department of Economics, University of Navarra

Why is a financial aid required of the bank?

Fri, 30 Sep 2011 08:19:52 +0000 Published in La Razón

Why are banks being asked to help the euro zone emerge from the crisis?
There are several arguments on the table. First, that the excesses committed in the past by the financial system are at the root of the crisis, so that those who participated the most in causing the imbalances should contribute the most to resolving them. Secondly, that one of the industries that would benefit most from a stabilization of the financial markets is the banking industry, so they should join in the effort to calm the current turmoil status . Let us not forget, moreover, that in some economies the poor fiscal position derives from formulas applied to rescue the banking system. Although, ironically, the poor state of balance sheets is also influenced by fiscal deterioration, since banks have a large volume of sovereign debt among their assets.

Is the Tobin tax the solution?
The above and similar arguments have the danger of falling into demagoguery, even if they contain a part B of truth. subject If it is decided to take measures such as the Tobin tax (fees on financial transactions), it should be done on the basis of a calm and sensible analysis of its pros and cons, not as a retaliation against the supposed culprits of the ills we are suffering. I doubt that it would be a solution to the problems of the euro zone, since the root of these problems lies in the institutional structure of the Monetary Union, which lacks the appropriate fiscal mechanisms to make it stable in such complicated circumstances as the current ones.

Who would collect and administer the tax, and what would be its final destination?
Its fate is an open question. NGOs such as Oxfam are calling for the proceeds to go to the most disadvantaged. As for the collection and administration, it would have to fall on the states that set it. There is another problem here, and that is that a tax measure of this nature requires the unanimous support either of the entire European Union (the United Kingdom would never accept it) or of the Monetary Union.