Sarkozy may go it alone on financial transaction tax

Sat, Jan 7, 2012, 00:00

FRANCE HOPES to secure German support for a contentious financial transaction tax by the end of the month, but may proceed alone to “set an example” for the rest of Europe.

The idea, strongly resisted by Britain, will be discussed by French president Nicolas Sarkozy and German chancellor Angela Merkel when they meet in Berlin on Monday to prepare for an EU summit on January 30th.

A senior adviser to Mr Sarkozy, Henri Guaino, said France would “lead on the issue” and decide by the end of the month whether to go it alone. “It’s better if Germany is involved. I hope we can do it with Germany. We will keep discussing it in the coming days and weeks, but France is ready to lead by example on this front and hopes it can bring others along,” he said.

As diplomatic efforts to bring the euro zone debt crisis resume, Mr Sarkozy announced that he and Dr Merkel will travel to Rome on January 20th to show support for prime minister Mario Monti.

In what will be seen as a call for the European Central Bank (ECB) to intervene more forcefully to ease pressure on vulnerable states, Mr Sarkozy last night urged all European institutions to “play their part”, just as governments had done.

Speaking after a meeting with Mr Monti in Paris, he praised the Italian leader’s courage and said France and Italy shared “identical views” on how the crisis should be resolved.

The scale of the problems facing European leaders was highlighted by new figures showing euro zone unemployment remained at a record 10.3 per cent for the second month running in November. Separate data revealed European banks parked €455 billion in the ECB overnight on Thursday – a new record – preferring to earn low interest rather than risk lending to each other.

The French government wants to have a financial transaction tax in place by the end of 2012. In his new year’s address, Mr Sarkozy called it “a moral issue” and said financial institutions should be called upon to help repair the “damage” they caused.

In an interview published last month, German finance minister Wolfgang Schäuble said Germany would push for such a tax to be introduced across the EU, or at least in the single-currency area. Ireland has indicated it is prepared to discuss the tax but is concerned the country could be disadvantaged if such a levy was applied in Dublin but not in London.

Euro-zone leaders are racing to draft the fiscal rulebook promised at a December summit, with Spain and Italy still having to pay heavily to borrow.

France continues to fret over the possible loss of its valuable triple-A credit rating, which would raise its cost of borrowing and could damage Mr Sarkozy’s hopes of re-election in May.

“It’s not France being targeted, it’s 15 of the 17 members of the euro zone,” the chief European economist at the Standard Poor’s rating agency, Jean-Michel Six, told the daily Le Parisien.