The Socialist group has won two big victories in the European Parliament this week, with Parliament’s Economic Committee voting to ban naked short selling, while the full parliament backed the report by Greek Socialist Anni Podimata to establish an EU-wide financial transactions tax (FTT) by a large majority of 529 votes to 127.
On Monday night the Economic Committee voted to regulate short selling and ban naked short selling. Naked short selling is where a trader sells a financial product without owning or even borrowing it, and is used for speculative purposes.
Many financial observers have long contended that naked short selling is both highly unethical but also played a significant role in the sovereign debt crisis as traders and investment banks used naked credit default swaps to bet against countries.
The proposed directive was adopted by 34 votes to eight, with the centre-right EPP group joining with the Socialists and Greens in support, while the committee chairwoman, Lib Dem MEP Sharon Bowles, joined the Tory MEPs in opposing it.
While the UK government will oppose the directive, the large majority in parliament, allied to the backing of a ban by most EU countries including Germany and France, means it is unlikely to be able to block the directive.
Today the parliament approved the Podimata report on “Innovative Financing”. The main issue of contention both at committee and plenary stage was over the creation of an EU FTT. The Socialist group has long campaigned for an EU FTT levied at 0.05%, arguing it would raise more than £100 billion a year since the EU is the largest financial market in the world.
In the Economic Committee, while the report was adopted with a large majority, the EU FTT proposal was narrowly rejected after a tied vote.
However, in the days before the final vote, German Chancellor Angela Merkel urged her 42 Christian Democrat MEPs to back the proposal, and the German delegation was joined by a small number of other EPP MEPs and 17 Liberals alongside the Socialist, Green and far-left groups.
The amendment demanding an EU FTT was adopted by 360 votes to 299.
Ms Podimata said it was now “time for the European Commission to act”, adding:
“Citizens have been hit hard by the financial crisis and face growing unemployment. At the same time, the financial sector remains largely under-taxed and has this year enjoyed profits and bonuses at pre-crisis levels.”
Of further interest was the way the UK government’s MEPs voted. While the Tory MEPs stuck rigidly to their line of opposition to both an EU FTT and the entire report, the Liberal Democrats managed to split three ways. On the vote specifically on an EU FTT, Lib Dem delegation leader Fiona Hall voted in favour; only one member, former Tory Edward McMillan-Scott, joined her in backing an FTT, while the rest all voted against.
On the vote on the entire report, which was adopted with the support of the EPP, Hall was joined by Chris Davies, Graham Watson and McMillan-Scott in support, with the Economic Committee chairwoman Bowles being joined by Sarah Ludford, Liz Lynne and George Lyon in opposing it. Catherine Bearder, Andrew Duff and Bill Newton-Dunn all abstained.
The Podimata report also calls for the introduction of a range of other new financial instruments aside from an FTT. These include a carbon tax and the introduction of ‘eurobonds’ which would allow EU countries to pool their national debt, eliminating the possibility of financial institutions speculating against an individual country’s debt financing.
Although the Podimata report is non-legislative, its adoption mandates the European Commission to draft a proposal to introduce an FTT. The vote also reinforces Labour’s demand for an FTT. Despite the attempts by the Tory-led government to ridicule Labour’s campaign on the grounds that an FTT had no international support, its support at EU level demonstrates there is clear international support across Europe for such a tax.
Moreover, with Shadow Treasury minister Chris Leslie again stating that “George Osborne should heed Labour’s call to repeat last year’s £3.5 billion bank bonus tax” it is clear that, unlike the Tories and the divided Lib Dems, Labour is the only party calling on financial institutions to pay their share for a crisis they caused.