GERMANY IS stepping up pressure on its EU allies for a European tax on financial institutions, a move that follows a lukewarm response to the notion at the G 20 summit in Toronto a fortnight ago.

Chancellor Angela Merkel and her finance minister Wolfgang Schäuble each said yesterday the European authorities should proceed with such a plan, Mr Schäuble adding that Germany would push with France to promote the plan.

Taoiseach Brian Cowen ranks among the European leaders who favour introducing such taxes but is leaning in favour of the Government receiving revenues from them instead of a central European fund. In this regard, he is at one with French president Nicolas Sarkozy.

Their position is at odds with the European Commission, which has suggested the proceeds from such taxes should go into an EU fund to bear the cost of any future bailouts.

A spokeswoman for European taxation commissioner Algirdas Semeta said the EU executive would complete an analysis of the options for such a tax by the autumn.

She added, however, there was no consensus as to whether such taxes should be levied on institutions or transactions, or on the profits or balance sheets of institutions.

The question is a tricky one for the EU authorities as decisions on taxation matters must be taken by unanimity. The bank tax proposal has met resistance in Britain, where there are fears of dimming the City of London’s lustre as a financial centre.

But the signals from Berlin yesterday were clear. “We will have to discuss once more at the European level” whether to pursue a pan-European transaction tax, Dr Merkel said in a television interview.

Mr Schäuble said: “In the next few days I will, together with my French colleague, call upon the European Commission to submit proposals on a measure for a financial transaction tax.”