The European Union’s decision to introduce a financial transactions tax (FTT) in 2011–2012

Abstract

The Eurozone was left reeling after the sovereign debt crisis in 2009. Huge bailouts to governments and banks to stabilise the Euro ensued and policymakers within the European Union (EU hereafter) sought to find a solution to the vulnerability of the Euro to volatility induced by currency speculation.1 In 2011, a Financial Transactions Tax (FTT hereafter) was proposed by the European Commission as both a method of recovering some of the funds that were lost due to the remedial fiscal policies that were implemented after the crisis, and also to be used as a corrective mechanism in order to reduce the volatility apparently caused by high frequency trades and currency speculators.2 The tax was to apply to trades in stocks and bonds, as well as derivatives, at a harmonised minimum of 0.1 per cent and a 0.01 per cent tax rate respectively.