For two years, European leaders have sought to tax financial transactions as a two-fer: simultaneously to raise revenue and to tame speculative market behavior. French President Nicolas Sarkozy and German Chancellor Angela Merkel emerged from a meeting in Paris today backing the idea.

The Tobin Tax lives.

The tax was first championed by John Maynard Keynes during the Great Depression. Another economist, James Tobin, revived the idea in the 1970s as a way to counter currency market speculation. The levy, sometimes known as a Tobin tax, was revived in 2009 as a Robin Hood effort to reclaim money from the bailed-out financial sector to compensate taxpayers in the U.S. and Britain. Others suggested the tax could be used to transfer money from wealthy to poor countries struggling in the backwash of the 2008 financial crisis.

The concept was briefly considered -- and dismissed -- by U.S. Treasury Secretary Timothy Geithner and Democratic lawmakers in the fall of 2009. Geithner concluded the tax wouldn’t work unless it was adopted globally, an unlikely event. If just one safe-haven country -- say, the Cayman Islands -- did not impose the tax, transactions would quickly move offshore to the Caribbean redoubt.

Similarly, if only stock and bond trades were taxed, the action would move to derivative instruments, like futures and options. And if they were taxed, deals would soon drift into opaque over-the-counter markets. Geithner also noted that the tax could ensnare less sophisticated investors, instead of the large firms it's mostly aimed at hitting.

But the Europeans aren't giving up. The London-based Institute of Development Studies in June concluded that a transaction tax could work. The study said the levy wouldn't likely stabilize volatile financial markets, but it wouldn't increase market distortions, either. That's damning with faint praise.

A tax on currency exchange could work even if implemented only within the euro zone, the IDS study said, raising $11 billion a year just in the U.K., where most foreign exchange is conducted. And if taxed worldwide, currency transactions could raise $25 billion.

Who would end up paying the tax? The IDS study said wholesale traders would bear the initial cost but, in the long run, a significant proportion could end up being passed on to consumers.