By Ambrose Evans-Pritchard
Jean-Yves Hocher from Crédit Agricole said it would cost his company €17bn. One French banker told Les Echos that the tax was "a weapon of mass destruction that is going to ruin our financial sector".
The Bourse de Paris and the nexus of French funds in Paris was already in slow decline even before this act of idiocy. Le Figaro fears that the entire industry will now whither on the vine.
Nobody seems to be listening to warnings, even when they come from Maya Atig, the soft-spoken director of French debt agency. She said any revenue from the tax would merely offset “the extra costs that we might have to pay” as liquidity drains away and yield spreads rise. Instantly proving her right, Denmark's €110bn pension fund ATP said it is no longer accepting French bonds as collateral.
Italy has not done much better since it launched its Tobin tax. Undaunted, 11 EMU states, including Germany, will press ahead together in 2014, to the delight of Singapore or New York. "Sheer madness," said Prime Minister David Cameron.
France's experiment with the Tobin Tax has proved a spectacular flop. Its finance ministry admits that the scattershot levy on financial transactions has raised just a third of the money expected since August.
One wonders how much self-inflicted damage the eurozone can endure. Spot gas prices are already four times higher than in the US. Energy prices as a whole are three times higher. You might as well shut down the European chemical, steel and glass industries.
Yet France has a moratorium on shale gas. Germany is running down its nuclear reactors, relying on a utopian dash for renewables and Baltic wind-power. Italy says it won't touch shale or nuclear. Buona fortuna.
Euroland is stumbling into ever deeper crisis, left behind in perma-slump as the growth differential with the US becomes entrenched at 2pc to 3pc. We are literally watching the moment when Europe loses its footing in the world.
The Tobin Eleven will impose a fee of 0.1pc for trade on shares and bonds, and 0.01pc for derivatives. These rates are far higher than the Swedish tax in 1989 that led to an 85pc crash in bond sales and a 98pc fall in bond futures, before being abandonded.
ICAP market analysts warn that the tax will "undermine prospects for sustainable economic recovery in the eurozone", raise borrowing and hedging costs across the board, make EU companies sitting ducks for takeovers and hobble banks as they grapple with €4 trillion of deleveraging. It does not make Europe safer. It will "increase the vulnerability of the financial system".
The International Capital Market Association says it would devastate the repo market, a vast pawn shop that allows banks to raise funds quickly and easily by pledging assets. It expects transactions to plunge by two-thirds overnight.
Even that may be optimistic. Gabriele Frediani from the electronic market MTS said trades would collapse by 99pc. “The Repo market would disappear overnight,” he said.
The repo market - $8 trillion in the EU and US combined - is a crucial lubricant of global finance. It was a failure of the repo system after the Lehman crash that set off the downward spiral in 2008. "The collapse of the repo market contributed to a liquidity shock that had far-reaching consequences for the global financial system," said an IMF study.
ICMA says that much of the current collateral system for banks will "cease to be viable" under the current plan. Investors will be driven into "unsecured deposits" not covered by the tax. The European Central Bank would struggle to conduct monetary policy.
It would be some comfort if London were at least able to offer refuge for those fleeing this misadventure, but the tax is drafted in such a way that it catches much of the City's business. The text covers all assets issued in the Tobin bloc or if there is a Tobin counterparty, even if the trade is in London, and territoriality be damned.
The House of Lords EU Committee says the Tobin Tax will have "far-reaching adverse consequences" for the City and wants a challenge at the European Court. Lord Harrison said he is "highly alarmed" that the Tobin Tax has been allowed to creep on us and slammed the "complacency" of both Whitehall and the City. "Some in London appear to hope that by closing their eyes to the proposal it will go away."
Whether or not you think there is a concerted assault on Britain, the fact is that for the first time in EU history a major country has been overridden in a field where it is the dominant player and has a vital interest. The rules of the game are that Germany is never threatened on the car industry, nor France on agriculture. This principle has been breached. It is a declaration of economic war.
Let us all agree that top bankers behaved very badly. Let us agree too with Vince Cable that the fraternity operated like a cartel, rewarded far beyond ability or worth to society.
That said, the global crisis would have occurred even if bankers had been saints. The roots lie in the "China effect", the world "savings glut", and the whole way that globalisation has worked for 20 years.
The rising powers of Asia and the oil bloc accumulated $10 trillion of reserves, flooding bond markets with money. Japan put $1 trillion into play through the carry trade. Central banks in the West played their part by running negative real interest rates. They set the price of credit too low, especially in Club Med and Ireland.
All this combined into one colossal bubble. Bankers were the agents, not the cause. The witchhunt against them gathering force in this country has a nasty edge, and it has the character of a pogrom in much of Europe. We should be careful.
It is hard to see how this crisis can be defused. Germany's Wolfgang Schauble has belatedly realised that the EU is playing with fire by pushing the UK too far. British exit would be "catastrophic", he said, asking how the EU could convince anybody in Asia that it has a future if a key member is walking out.
This olive branch comes late in the day. Euroland leaders cannot exempt Britain from the Tobin tax because they know that their own finance will migrate en masse to London if they do, yet they are too committed to this suicidal enterprise to retreat altogether. So we must fight.