Financial deal tax sought by nine EU member states
GERMAN FINANCE minister Wolfgang Schäuble and eight EU colleagues are pushing for a tax on financial transactions before the middle of the year.
In a joint letter to the Danish EU presidency, nine finance ministers call for a far-reaching levy on all sales of stocks and bonds, currencies and derivatives.
“We are convinced that a financial transaction tax should be introduced at the European level and we would welcome if the presidency speeds up the negotiation process,” wrote the ministers, including Italy’s and France’s.
German officials suggest the process should take into account all proposed models to “overcome all opposition” and secure agreement by June. Berlin suggests that, to succeed, any such tax will have to be simpler and more ambitious than proposals put forward by the European Commission.
Last year, the commission suggested a tax of 0.1 per cent on the exchange of shares and bonds and 0.01 per cent on derivative contracts in the EU could generate up to €57 billion annually.
Britain has dismissed this proposal, leaving many of the 17 euro zone members determined to push ahead with their own tax. It is, in turn, opposed by Ireland and others, who fear it will put their financial sectors at a competitive disadvantage to the City of London. Similar arguments have been aired by Chancellor Angela Merkel’s Free Democrat (FDP) coalition partners. Given Britain’s refusal to back a far-reaching tax, the FDP has called for a compromise: the introduction of stamp duty on shares, along British lines.
Berlin’s hopes for quick progress on the tax could yet fall victim to domestic political concerns. Germany’s opposition Social Democrats (SPD) are undecided as to whether they should make agreement on a full tax on financial transactions a pre-condition for their backing the European fiscal treaty. Dr Merkel needs a two-thirds majority – and thus SPD support – to get the pact through the Bundestag.
“Growth and employment measures could be financed from the takings of such a tax,” said Ralf Stegner, SPD leader in Schleswig-Holstein. The SPD’s Juso youth wing argues in a position paper that, “as long as a financial transaction tax is not agreed, the SPD cannot agree to the fiscal pact”.
But senior SPD leaders are undecided about whether to make the tax the price for their fiscal treaty support. Parliamentary leader Frank Walter Steinmeier says SPD support will depend “considerably on whether the government is open to additional measures” to stimulate European economies.
“Additional measures to promote economic growth . . . must urgently be agreed,” he said. “For this, you would obviously need the funds that must come from things like a tax on financial markets.
Other senior SPD figures suggest the party should demand Berlin pushes for a debt redemption fund. That plan, first floated by German economists, would involve pooling sovereign debt above 60 per cent of gross domestic product into a redemption fund with joint liability. Any assistance from the fund would depend on aid recipients agreeing to fixed repayment and reform plans over an extended period.
Senior members of Dr Merkel’s ruling Christian Democrats (CDU) are optimistic a financial transaction tax will not stumble on Germany’s account. “If there are signs that the introduction of a financial transaction tax within the euro zone is possible, the FDP would not refuse it,” said Norbert Barthle, CDU budgetary spokesman.
The tax is most opposed by those it would hit. The European Banking Federation says its members pay 17 per cent of EU tax revenues though they make up only 6.5 per cent of the bloc’s GDP.
“Taxing banks is a fashionable idea for politicians and the public, but it has a cost and this will be felt by companies, small- and medium-sized businesses and households,” said chief executive Guido Ravoet.