Chancellor Gerhard Schröder has called for Germany and France to lead a debate on speculative international capital flows, thereby putting one of the main demands of the anti-globalisation movement on the European political agenda.
Speaking on the eve of an informal dinner in Berlin on Wednesday night with French president Jacques Chirac and premier Lionel Jospin, Mr Schröder said there was a need to recognise "weak spots" in the international financial system, such as offshore centres, hedge funds and derivatives.
"So I want to discuss with our European and especially French partners how we can react to these relatively autonomous speculative financial flows," he said. The chancellor stopped short of supporting Mr Jospin's recent espousal of the so-called "Tobin tax". The tax, proposed by James Tobin, the American economic Nobel laureate, would put a levy on turnover in currency markets. The anti-globalisation movement has suggested the proceeds of such a tax could be used for global poverty relief.
Addressing an international economic conference organised by his Social Democratic party, Mr Schröder noted serious shortcomings with the Tobin tax. "For example, how do you distinguish speculative financial flows from those related to genuine trade finance?" he asked.
But the chancellor's comments, ahead of a meeting of EU finance ministers in Belgium and a separate gathering of Social Democratic leaders in Sweden this month, marked an important shift in Germany's willingness to recognise the objections of the anti-globalisation movement.
Describing the Tobin tax as one of many instruments which could be used, Mr Schröder said such issues needed to be discussed by Europe's finance ministers "with all clarity".
Only last week, Hans Eichel, the finance minister, rejected the Tobin tax on practical grounds at a meeting with Laurent Fabius, his French opposite number.
Mr Schröder's remarks also contrasted with criticisms from Ernst Welteke, the Bundesbank president.
In a speech prepared for delivery on Tuesday in Dublin, Mr Welteke said the Tobin tax would come at too high a cost. "Foreign trade in goods and services is bound to suffer as well. In the end, the wealth-enhancing international division of labour will be hampered."
Mr Welteke said that, in times of economic distress, a Tobin tax would be ineffective because profits from speculative capital movements would far outweigh the cost of any sensible tax on transactions.
He also praised the increasing integration and liquidity of world financial markets, saying this made them more attractive to international investors.
Mr Welteke made clear the Bundesbank regarded any attempt by governments to "throw sand in the wheels of the foreign exchange market" as unrealistic.
The chancellor's remarks - and notably his clear distinction between collectivist European social values and the more individualistic US ethos - were also in line with his markedly greater emphasis on social issues of late. With national elections only a year away, such themes, geared to the SPD's core centre left supporters, have become increasingly prominent in recent speeches.
Copyright The Financial Times Limited 2001.
<http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3G3HX08RC&live=true&tagid=FTDO9DHMZJC>