Senior ECB member says ‘Robin Hood’ tax could damage eurozone

The proposed financial transactions tax has the potential to do enormous damage to the eurozone’s financial services sector, according to one of the most senior members of the ECB, Christian Noyer.

Ireland is opposed to the measure and is not one of the 11 eurozone countries that plan to introduce the ‘Robin Hood’ tax that aims to raise roughly €35bn each year.

Mr Noyer, the governor of France’s central bank and an executive board member of the ECB, told the Financial Times that “the [European] commission’s draft is a non-starter and needs to be entirely revised”.

He argued that it will undermine the French financial services sector. “I do not believe it was ever the intention of the French government to do something that would trigger the destruction of entire sections of the French financial industry, trigger a massive offshoring of jobs, and so damage the economy as a whole.”

He said the commission’s proposals posed “an enormous risk in terms of the reduction of output in the financial transactions tax jurisdiction; increased cost of capital for governments and corporates; a significant relocation of trading activities; and decreased liquidity in the markets”.

Mr Noyer added: “The most important concern for the central banks is the risk of the total drying up of repo markets. That means the transmission of our monetary policy would be seriously impaired and the risk in terms of financial stability would not be negligible.”

In coalition talks to form a German government, the SPD party insists the only public funds that should be used as a backstop for the banks must come from a financial transactions tax .

The Irish Government is against it on the basis that it would undermine the country’s competitiveness as the British government has firmly ruled out introducing an financial transactions tax.