Among Prof. Dr. Thomas Straubhaar in the course of the euro crisis, considerable amounts of money emigrated to the States debt, while well-off Greeks tried their utmost to provide their assets abroad, out of reach of the public sector. This has understandably led to a lot of trouble and falsely stupid prejudices. The truth is that Greece receives massive support from the German side.
Nevertheless, the complexities of the euro area require a more thorough approach. Those who monitor a closer look at the cash flows surely will be surprised. Topping the list of possible destination ports for Greek savings is Switzerland. To the Swiss franc, which is set through these strong inflows under upward pressure to weaken the Swiss National Bank (SNB), the exchange rate should be fixed in future dollar / euro. More precisely put, the SNB set a maximum price of 0.833 euros.
To maintain this, it is prepared to buy foreign currency in unlimited quantities. With this announcement, Switzerland was one of the world’s biggest currency speculators. To provide for reducing the cost of the Swiss franc, the SNB had to fire up the printing presses and convert the newly created money in euros. Sun, the National Bank 2012 foreign money in an amount equivalent to 70% of Switzerland’s GDP.
It is about more than more than 93 billion euros in addition to the euro area, within a year, from summer 2011 to summer 2012. The bulk of these purchases should be made in government bonds, and one suspects that the security-loving Swiss have decided in favour German or Dutch securities.
This means that the Germans only be satisfied. Nevertheless, in this fact has nothing new or surprising. There is something you should be noted. Namely, that it is means that the demand of the SNB by German government bonds, affects on lowering interest. Although speculating about the exact magnitude of this effect you can be sure that it is true. The interest burden of the federal government in 2012 shows that is precisely declined by 5.8 percent.
While Switzerland has to be content with minimal interest rates. Thus, Germany refinance low in the capital market.
It was blessed the end of January and it should help the European Union back to stability. The tightening of the debt crisis is currently prevented only by the ECB. With the further opening, the monetary floodgates early December yields on government bonds will be reduced.
The consequences are uncertain. With the fiscal pact will be the European countries prescribe even more fiscal discipline. On the one hand, a good signal, but seems to have recognized that the stabilization of the euro zone can only be solved through fiscal discipline. Moreover, Germany has to have fought successfully against the surety for debt of all other countries.
Nevertheless, the Pact has weaknesses. Already committed to the Stability Pact, the Member States to aspire balanced budgets. They been added only new is the compulsion to debt brakes implement it into national law. The lack the political will however, playing the role of the debt brake. Fiscal rules have to be complied with only good view. Already becoming apparent, however, that in many countries, the pact is seen as a straitjacket. With Germany, Europe wants to impose its fiscal and economic policy. Nevertheless, even if all countries adhere to these guidelines, the debt crises are not precluded in the future. This is true when, as in the case of Ireland and Spain, the cause is not the fiscal intemperance.
The current optimism of investors is not very likely. With regard to this statement can be given as an example the joy of the Fiscal Pact. Maybe you have already guessed about what exactly it is. Of course, let us look at things from all sides. Only in this way can be found a good solution. Just recently, there was feedback in terms of the gifts of money to the ECB. However, this cannot be one-sided and it should not be treated this way. In fact, cheap money can exacerbate the crisis further.
In this case, they will not be so needed medicine. This behaviour weakens the value of the euro and causing inflation. The fiscal pact cannot to be in the short term.
For weeks, the topic of financial transaction tax is warming up again. She is obviously not the solution to the current problems and in all the variants discussed shows the FTT major flaws. The financial transaction tax has two main objectives. The first is fiscal, thus is intended to achieve a tax benefit. It may be due to the financial crisis well used by all states, curbing speculation and high frequency trading. For these two phenomena is given the responsibility for the financial crisis.
Even here, a conflict is clear. It comes to a high financial transaction tax, which may curb high frequency trading and speculation, thus achieving an effectively the non-fiscal target. The fiscal objective cannot be achieved in this way, since the number of taxable transactions would fall sharply and correspondingly less money flowing into the coffers.
A low tax rate, however, can mean quite a high income tax, would have probably. No appreciable effect on the amount of speculation and high frequency stores. The specific design of the FTT thus decides on the goals to be achieved. One thing is certain. A national approaches is not the solution, the speculators would simply move to other markets and thus avoid the tax.
The gross sales tax, which is levied on the sales of businesses in the financial markets, may to be expected for sure. The tax will be passed on to customers. This deteriorates the investment environment, and has a negative impact on growth and employment. The British exchange control, which is often introduced as a compromise proposal does not constitute a viable alternative.
They taxed heavily criticized the high frequency trading and no distortion of competition. The fiscal objective could be achieved by the recommended by the IMF Financial Activities Tax. The non-fiscal goal of curbing speculation and high frequency trading, but could only regulatory measures (such as a reform of financial regulation) can be achieved.
It turns out that the concept of the FTT has many weaknesses and is not due to the trade-offs must be coherent. The financial transaction tax is a mistake that should not be pursued.