Christoph Leitl, a member of the conservative Austrian People's Party (ÖVP) and a former deputy governor of Upper Austria, has just been appointed for a second term as head of Austria's Federal Economy Chamber (WKÖ).
He was speaking to EurActiv's Claire Davenport.
To read a shortened version of this interview, please click here.
You recently raised eyebrows by backing plans to introduce the tax on financial transactions only in Austria, pointing out this could lure other European countries into doing the same. The G20 is unlikely to push through any taxes on banks and will probably leave countries to devise their own plans. Do you think the EU or individual EU countries like Austria should persevere and introduce taxes on banks despite global reluctance to do so?
Recently I was at the finance committee of the German Bundestag as an expert talking about how the financial sector could also contribute to tax revenues. I am against pointing fingers but I think we should have a fair tax system that does not only rely on the real economy. It is said that the real economy is immobile compared to financial markets, and that's why the real economy must carry the tax burden.
Just like we are seeing in Germany, in Austria two models are currently being discussed: a bank levy on the one hand and a financial transactions tax on the other hand.
Ahead of the G20, the German, French and Austrian leaders, Angela Merkel, Nicolas Sarkozy and Werner Faymann respectively, argued in favour of introducing a financial transactions tax (FTT) at a recent EU summit. At the same time the UK, France and Germany are putting together plans for a different proposal, a levy on banks' books. This seems like a very fragmented way of making policies. Shouldn't they just decide on one measure first?
That the leaders did this is a first and important step in the right direction. The number of EU governments in favour of an FTT has risen in the EU, which was brought into the picture by Austria in particular.
One thing is certain though: An FTT is preferable to a bank levy as it would dampen speculation and would provide more stability in the financial sector.
But a bank levy, according to a proposal from the European Commission, is supposed to shore up funds for more bailouts in the future. Isn't that important too?
A bank levy is a bank customer levy. Those who invest and buy consumer goods and those who should urgently revive the economy will have to carry the burden. That is the wrong way of doing things.
On the other hand a tax on financial transactions of a certain size - not your daily transfers on your account, but the big sums traded by speculators - should make a contribution to bring the economy back into balance or - as has been discussed on a European level - create a kind of European Monetary Fund.
I am completely open to that possibility.
Countries in the EU have taken tough austerity measures to reduce their budget deficits. Is this kind of belt-tightening the right thing to do?
If you're making cuts where structures have aged, like bureaucratic structures, then I am in favour and it's a detox for Europe. But if you are cutting investments in education and research, then that's the wrong way of doing it. And when you add on extra taxes, then its even worse, as you will be taking away consumers and investors' purchasing power.
China has grown by 10%, India 9%, the USA 3%, Japan 2% and Western Europe 1%. That is too little. We will never be able to tackle unemployment, social welfare, demographic change and budget consolidation. That is impossible. That's why we have to boost growth first.
So how should we foster growth then, in your view?
You could use eurobonds, for example, to spur growth, especially for small and medium-sized enterprises. This would be a very good starting point. And of course we would need to spur national and regional growth. In Austria, for example, the regions had to save on investments with the limited financial resources they receive. That would be the wrong way to spur growth.
Germany's finance minister, Wolfgang Schäuble, has been trying to get the EU to come round to his way of thinking and impose tougher sanctions on countries that cannot control their debt problems. Is this the kind of tougher line the EU should be signing up to?
We need common fiscal, economic and budgetary coordination. We have a common currency in the 16-member euro zone. These 16 should have better fiscal and budgetary coordination. I am with Schäuble in this instance: common rules, oversight of the rules and sanctions for those that drift away from the rules.
Could you explain what you mean by common rules?
That we walk a path of consolidation, that we designate which direction national budgets are going in. That we learn from the Greek crisis. There can be no repeat of Greece. That's why we need new rules that won’t be stuffed into a drawer but will be used somewhere.
Would your common rules include a fund to loan money to indebted countries like the 750bn 'special purpose vehicle'– or bailout fund - that was agreed after the EU discovered the severity of Greece's budget problems?
Yes, they would. The euro zone fulfilled its role as a protective union. Any country could find itself in this situation and need our support. Even Austria has been in this situation after money lost by our banks' subsidiaries in Eatsern Europe led to a downgrade by an American rating agency. The rating was revised four days later, but if we had had the schilling and not the euro, we would have been in big trouble.
So the monetary union exists to protect each country, and that is very important these days.
Sure. But a bailout of another country is still a bitter pill for taxpayers to swallow.
Of course taxpayers have a right to ask ‚why should we pay for Greece when it could not get its own house in order?’ But I say, hang on a minute, the Greeks have a heavy price to pay. Would you want us to land in the same situation? Greece will repay loans with 5% interest on top. We borrow at 3% and lend it at 5%. That's actually a good deal for us.
We have to explain to people that this is about their currency and their economic security too. And that we cannot yield to speculators on the market.
So are you part of the school of thought that wants to offset the dominance of American rating agencies with an EU agency?
Yes I am. Rating agencies gave Lehman Brothers AAA five days before they came crashing down. Now they have downgraded Spain and upgraded California. The way they work is not rational. We should try to create a European rating agency. If that takes several years, which is realistic, we should let EU borrowing be graded by the European Central Bank. In the short-term that is possible and it would be an interesting solution.
We should also remember Goldman Sachs in this debate. They helped Greece to cheat and to speculate against their own investors. That cannot be allowed to happen. I have said in the past that Sachs belongs on a European watchlist and I will repaeat it now.
So you would rather put your faith in an EU-made rating agency than the likes of Moody's?
I would much prefer a rating from the ECB to one from Moody's.
If we can change the oversight of rating agencies and don't leave them to their own devices, as before, but make them responsible for damages caused by their downgrades, then why can't we pursue a claim against Goldman Sachs for giving misleading signals to investors?
