As the year draws to a close, it is worth sparing a thought for who pays and should pay for the consequences of bank collapse.
Hungary is in the news this week because, amongst other things, it has announced a series of special , temporary taxes to reduce the public budget deficit. Hungary is broke and has few other options for making its debt payments. It is already raiding its pension funds, as Ireland has done.
Banks and insurance companies have been targeted for special taxes, and are now appealing to the European Commission to declare the taxes illegal. From the Hungarian perspective, taxes are now a question of survival, and there is every reason why the financial services industries who brought down the world economy and paid very low taxes during the boom years ought to pay their share of a tax increase now. The banks are arguing that the taxes are wrong because they target them, and because many of Hungary's banks are foreign. Targeted sectoral taxes don't stand a chance of being undermined, but if there is one thing that EU law can sink its teeth into, it is anything that disproportionately burdens foreign over domestic firms.
Banks, especially foreign ones, may find Hungary a less attractive place to do business in the future, but that is no reason to push for the end of democracy in Hungary. For that is what they are attempting to do. When a country no longer controls its finances, its sovereignty is effectively at an end.
Hungary is yet another facet of who pays for the immediate and downstream costs of the crisis. Iceland made the banks' depositors pay. Ireland made ordinary citizens pay, refusing to bill the companies. Hungary has passed a law making businesses pay, particularly the ones who brought on the crisis. That they should share in the burden seems only fair.
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