Why France’s 'Tobin tax' could save the City

The City has time and again proved itself a survivor. Something always turns up to save the day, says Matthew Lynn. And this time that something is François Hollande's Tobin tax.

It is hard to see how the City's prospects could deteriorate much further. The Libor investigation is turning into one of the great financial scandals of the decade, shredding the City's reputation for plain and honest dealing. The main British banks are either semi-nationalised or facing an assault on their integrity. The regulatory system has been exposed as a shambles and the equity markets are stuck somewhere between panic and despair. But London's financial district has always had a genius for re-invention. And the EU's proposed Tobin tax on financial transactions may turn out to be its get out of jail free' card.

The City faces a uniquely challenging moment in its long history. The big investment banks that dominate the London market are facing a grim future. Greater regulatory micro-management is inevitable after the Libor scandal. The crisis in the eurozone has made every type of investment look risky. Mergers and acquisitions are on hold. After a bear market that is now stretching into its 12th year, investors are starting to give up on stocks. There is still money being made but nothing like as much as there was during the boom.

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Matthew Lynn

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years. 

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.