Bank tax proposed to help Greece bail-out

Gets stranger by the day as all sides seem to be struggling to merge the political with the pseudo economic.

A Greek bailout adds nothing to aggregate demand, as it doesn’t result in any increased spending from current budgeted levels.

However, and while not all that large, this bank tax both removes net euro financial assets from the private sector,which lowers aggregate demand, and raises the banking system’s overall cost of funds.

Bank tax proposed to help Greece bail-out

July 20 (FT) — A proposal to tax eurozone banks to help pay for a Greek rescue has emerged as the possible central pillar of a new bail-out programme. The plan, which advocates believe could raise €30bn over three years, could help satisfy German and Dutch demands that private holders of Greek bonds contribute to a new €115bn bail-out. It would also likely avoid a default on Greek debt. Both Berlin and The Hague are still insisting that other options for private bondholder participation be included. Officials said those proposals – which include a government-financed bond buy-back programme, a German-backed bond swap proposal, and a French plan for bond rollovers – could be included as a “menu” of options available to bondholders.

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