The recent decision of the European Union to cap bankers’ bonuses is a true step in the right direction of regulation of the financial markets, writes Ernst Stetter.
Ernst Stetter is secretary-general of the Foundation for European Progressive Studies, a think tank.
"The harsh reaction of the City of London to the bonus cap shows clearly how necessary this decision was and how outraged these so-called elite bankers are. David Cameron and Boris Johnson have also strongly opposed the move, showing more concern that capping bonuses at a basic salary will scare banks away from London and damage its position as one of the world's largest financial hubs.
It is no longer acceptable that banks report huge losses whilst at the same time dish out very generous bonuses. For instance, in 2012 the Royal Bank of Scotland reported losses of more that £5 billion after paying out more than £600 million in bonuses.
We should recall ourselves that the bankers gambled the world and Europe into the deep crisis to which the severe consequences we are witnessing for several years now. The taxpayers had to procure the money to rescue most of the banks from bankruptcy and only now it is the first time that they will be requested to accept some responsibility towards society. This has been long overdue.
After the decision of the financial transaction tax and now the bonuses cap, we are a step closer to the matter that the financial markets have to serve the people and not that the people should serve the markets.
However the battle is not yet won and the next issue is tax evasion and tax fraud. An estimated €1 trillion in public money is lost to tax fraud and tax avoidance every year in the EU. This roughly represents yearly costs of €2,000 for each and every European citizen.
Let us imagine that if governments collected the money from financial transaction taxes, unpaid bankers’ bonuses and tax fraud and evasion and put it together they could spent it much more wisely. For instance, investing in education, research and innovation would create jobs and growth and foster our European social security systems.
The social and financial situation of European citizens would in much better shape. Then we would also lower the risk of populists, such as those now in Italy, from winning elections and putting Europe even deeper into crisis."
The original text with references is available on BlogActiv.eu.