Why Greece never got a fair chance

Following Greece’s failure to make a scheduled debt repayment to the IMF on 30 June the country now stands on the brink of exiting the euro. Sony Kapoor writes that while the Greek government could be accused of naivety in the manner it has conducted negotiations, the root cause of the crisis has been the unwillingness of Greece’s creditors to rectify previous mistakes by providing further debt relief to the country. He argues that unless creditors alter their approach over the next few days, the consequences could be severe for both Greece and the Eurozone

A Eurozone-wide IMF programme could save both

In past decades, the International Monetary Fund has had a potent reputation, especially in the developing world. In its programmes in Europe, however, the IMF has had to take a back seat to the desires of the European Commission and the European Central Bank, whose policies have thus far been less than successful. In light of this, Sony Kapoor makes the case for a eurozone-wide IMF programme, which would move away from the current piecemeal solutions focused on the economies of Europe’s periphery. He argues that a successful Eurozone-wide IMF programme would deliver a more symmetric method of restoring competitiveness, an EU-wide approach to stabilising the banking system, a greater focus on restoring aggregate demand, a deepening of the single market and a credible road map for the Eurozone

Taking the Next Step - Implementing a Currency Transaction Development Levy

As we approach the half-way point for the achievement of many of the Millennium Development Goals (MDGs) the spotlight is shining ever more intently on the urgent need for new sources of revenue to pay for them. With the first international development duty launched, in the form of the ‘pilot’ solidarity levy on air travel, the momentum needs to continue to the implementation in quick succession of a second such initiative to provide another long term predictable source of additional finance. Innovation is required not just in financing but also in delivery. UNITAID’s mission is to transform a situation of high cost drugs for the treatment of the few to low cost drugs for the care of the many. In so doing its potential value is exponentially greater than a simple addition of extra revenue. The choice of how and where the next new stream of finance is spent also needs to be to be similarly strategic. The Core Group1 Governments rightly pride themselves on an international development policy that has, as one of its pillars, the tackling of global inequality which has risen rapidly in the latest phase of globalisation. For example President Chirac opened the Paris conference held in February 2006 in Paris stating that ‘despite the continuous increase in global wealth, a third of humankind still lives on less than a euro a day’, and that ‘…globalisation, far from bridging the (poverty) gap, is widening it even further’. In this report, we offer some suggestions for tackling global inequality through concrete proposals for both raising substantial new revenue equitably and spending it in ways that strategically target the ‘weak spots’ in the international development effort. The financial services industry has been one of the biggest beneficiaries of globalisation. Annual turnover in the global market for currencies, has, for instance, expanded from about $4 trillion in 1973 to$40 trillion in the mid 1980s to more than $450 trillion now – a more than 100 fold increase.2 Profits at financial services firms are also at a record high with the top two most profitable banks, Citibank and HSBC, posting more than$40 billion of profits between them in 2005 alone. At the same time as industries such as airlines and financial services have benefited from globalisation, populations in many of the poorest countries, especially those in sub- Saharan Africa, have been left behind – or worse, harmed. Average life expectancy in these countries is in fact down from 50 years in 1990 to 45 years now, just over half the almost 80-year life expectancy in countries such as Norway. The health, education and productivity problems caused by a lack of access to basics such as clean drinking water and sanitation facilities, the added decimation wrought by global pandemics such as HIV/AIDS on the ability of the populations and systems in poor countries to cope, and the increased vulnerability linked to climate change, all threaten to undermine and, in fact, roll back the slow progress that has been made to date towards meeting the MDGs. In Section 2 we demonstrate in some detail how, by introducing a very small levy of less than a hundredth of one per cent on currency transactions, many countries can unilaterally generate substantial resources for development from those who can most afford to pay. Such a levy is simple and inexpensive to apply in this age of electronic transfers. Whilst this proposal is specific to the currency market, it can be generalised to apply to other financial markets many of which already pay some form of a levy. The possible uses for this revenue that we propose in Section 4 have been shaped by the need to lever maximum results from the resources generated. The three potential areas for immediate financing that we have identified would generate positive additional outcomes towards the achievement of several seemingly unrelated development goals. First, provision of clean water and sanitation, as it is a foundation stone that underlies the ability to make meaningful progress with the vast majority of the MDGs. Second, providing human resources for health, because without sufficient trained health workers, medicines and infrastructure are simply not enough on their own to contain the raging pandemics of HIV/AIDS, TB and malaria. Third, providing a long term predictable source of funds to an expanded UN Central Emergency Response Fund, to create a more robust response to the growing threat of natural disasters and humanitarian emergencies.currency tax; tobin tax; MDG; Financial markets; Financial Transaction Taxes

Indians wanted us out, Europeans want us to stay. This time British citizens will bear almost all the costs

European nations, who were once sworn enemies, are now living in a world that the Indian subcontinent can only dream of. Sony Kapoor (Re-Define) says the history of the British exit from India as a reminder that the peace and prosperity the EU has delivered, including to the UK, cannot be taken for granted. He warns that while the calamity of 'Brexit' from the Indian subcontinent in 1947 affected only that region, the equally badly planned and divisive Brexit from the EU will inflict costs on almost all British citizens

Taking the Next Step - Implementing a Currency Transaction Development Levy

As we approach the half-way point for the achievement of many of the Millennium Development Goals (MDGs) the spotlight is shining ever more intently on the urgent need for new sources of revenue to pay for them. With the first international development duty launched, in the form of the ‘pilot’ solidarity levy on air travel, the momentum needs to continue to the implementation in quick succession of a second such initiative to provide another long term predictable source of additional finance. Innovation is required not just in financing but also in delivery. UNITAID’s mission is to transform a situation of high cost drugs for the treatment of the few to low cost drugs for the care of the many. In so doing its potential value is exponentially greater than a simple addition of extra revenue. The choice of how and where the next new stream of finance is spent also needs to be to be similarly strategic. The Core Group1 Governments rightly pride themselves on an international development policy that has, as one of its pillars, the tackling of global inequality which has risen rapidly in the latest phase of globalisation. For example President Chirac opened the Paris conference held in February 2006 in Paris stating that ‘despite the continuous increase in global wealth, a third of humankind still lives on less than a euro a day’, and that ‘…globalisation, far from bridging the (poverty) gap, is widening it even further’. In this report, we offer some suggestions for tackling global inequality through concrete proposals for both raising substantial new revenue equitably and spending it in ways that strategically target the ‘weak spots’ in the international development effort. The financial services industry has been one of the biggest beneficiaries of globalisation. Annual turnover in the global market for currencies, has, for instance, expanded from about $4 trillion in 1973 to$40 trillion in the mid 1980s to more than $450 trillion now – a more than 100 fold increase.2 Profits at financial services firms are also at a record high with the top two most profitable banks, Citibank and HSBC, posting more than$40 billion of profits between them in 2005 alone. At the same time as industries such as airlines and financial services have benefited from globalisation, populations in many of the poorest countries, especially those in sub- Saharan Africa, have been left behind – or worse, harmed. Average life expectancy in these countries is in fact down from 50 years in 1990 to 45 years now, just over half the almost 80-year life expectancy in countries such as Norway. The health, education and productivity problems caused by a lack of access to basics such as clean drinking water and sanitation facilities, the added decimation wrought by global pandemics such as HIV/AIDS on the ability of the populations and systems in poor countries to cope, and the increased vulnerability linked to climate change, all threaten to undermine and, in fact, roll back the slow progress that has been made to date towards meeting the MDGs. In Section 2 we demonstrate in some detail how, by introducing a very small levy of less than a hundredth of one per cent on currency transactions, many countries can unilaterally generate substantial resources for development from those who can most afford to pay. Such a levy is simple and inexpensive to apply in this age of electronic transfers. Whilst this proposal is specific to the currency market, it can be generalised to apply to other financial markets many of which already pay some form of a levy. The possible uses for this revenue that we propose in Section 4 have been shaped by the need to lever maximum results from the resources generated. The three potential areas for immediate financing that we have identified would generate positive additional outcomes towards the achievement of several seemingly unrelated development goals. First, provision of clean water and sanitation, as it is a foundation stone that underlies the ability to make meaningful progress with the vast majority of the MDGs. Second, providing human resources for health, because without sufficient trained health workers, medicines and infrastructure are simply not enough on their own to contain the raging pandemics of HIV/AIDS, TB and malaria. Third, providing a long term predictable source of funds to an expanded UN Central Emergency Response Fund, to create a more robust response to the growing threat of natural disasters and humanitarian emergencies

The Cyprus fiasco has all the hallmarks of a classic ‘whodunnit’

Cyprus’s parliament has rejected a proposed agreement to levy €5.8 billion from Cypriot bank accounts as part of the country’s bailout deal. Sony Kapoor argues that despite the extremely negative reaction to the proposal, the other options facing Cyprus are no more appealing. Seeking assistance from Russia through the gas company Gazprom might generate long-term complications for the country, and the collapse of the Cypriot banking system would have far more severe consequences than the proposed bank levy

A cap on bankers’ bonuses is needed to limit excessive risk taking and the associated costs to the taxpayer

A provisional EU agreement has been reached on the principle of capping bonuses in the European banking industry. Sony Kapoor and Philippe Lamberts present a case in favour of such a cap, arguing that the current skewed incentives faced by bankers drive excessive risk-taking, which ultimately has to be paid for by taxpayers

Plans for a banking union may not be enough to tackle the eurozone’s economic crisis

Many commentators advocate a banking union as a partial solution to the eurozone crisis, arguing that it will break the ‘vicious circle’ between weak banks and weak sovereigns. Looking at the current role of the European Stability Mechanism, Sony Kapoor and Charles Goodhart write that a banking union may prove ineffectual because equity cannot be injected into weak banks or be used to tackle past losses, and could not be used without a sovereign guarantee. Instead of potentially increasing their liability, they propose that sovereigns should be shored up so they are better able to support weakened banks