France and Germany: Like the iconic bunny, the idea simply won't die. At the very least, Angela Merkel and Nicolas Sarkozy want to make sure the proposal for a global tax on financial transactions is still alive at next week's G20 summit in Canada.
The French president and German chancellor say they will jointly defend the idea, but they know it's a non-starter. So is another tax idea they will try to revive: that of a levy on banks which would help pay for future bailouts.
Neither Sarkozy nor Merkel is naïve enough to think the G20 will suddenly see the light. Their goal is elsewhere: after months of bickering and widely diverging opinions on the best ways to overcome the euro zone crisis, they need to show the rest of Europe that the traditional Franco-German tandem isn't actually broken. What better way than by promoting the populist idea that banks must be taxed and markets punished?
Since the debt crisis started, Merkel has upped the rhetoric on the need to regulate finance, crack down on “speculators” and make someone pay for the crisis. Sarkozy has been less intense, but he badly needs to keep his German counterpart sweet.
He may think consenting to Merkel's regulating fury is a way to tame it. Also, concord could help him soothe her wrath on France's fiscal insouciance. Merkel is clearly hoping that more anti-finance fury will calm her many domestic critics, after having been accused of giving away the farm to the French when she agreed on a global bailout mechanism for euro zone debtor countries.
The problem is that no one will be fooled by this somewhat artificial show of unity. The bank levy idea has already been dumped from the summit's agenda by finance ministers, and no one else wants to hear about the global transaction tax. Merkel and Sarko vaguely imply they might go ahead and proceed unilaterally even if others don't want to. They may think it's a threat. But for their financial rivals, this would merely be an opportunity.
