BRUSSELS – A group of 11 European countries is pushing ahead with the introduction of a tax on financial transactions and wants to present a plan by May, French Finance Minister Pierre Moscovici said Tuesday.
Officials started pushing for the tax in the wake of the 2008-9 financial crisis to curb speculation by investors and claw back revenues following the government bailouts of banks.
While the idea is seductive for policymakers, its implementation has proved a headache and the nations involved — the bloc’s major economies except Britain — haven’t been able to reach an agreement for over a year.
“We have to make progress,” German Finance Minister Wolfgang Schaeuble said ahead of a meeting of the finance ministers from the 11 eurozone nations.
He said the tax may have to be introduced bit by bit. The trade of stocks could be taxed first, while officials debate how to tax more complex products like financial derivatives.
The main difficulty is determining what financial products should be taxed and to what extent. In addition, it’s still unclear where the products would be taxed: In the country where they are issued, where they are bought, or both?
EU nations estimate the levy could yield tens of billions of euros (dollars) annually. Schaeuble declined to speculate when the tax might first take effect.
Germany and France, the European Union’s largest economies, are strongly in favour of the levy, but Britain, which is home to the bloc’s biggest financial hub, London, is adamantly opposed, saying it will undermine the banks’ competitiveness.
At a separate meeting in Brussels, the EU’s 28 finance ministers sought new ways to reach an agreement with European lawmakers on the timely creation of a body that can unwind or restructure ailing banks, the so-called single resolution mechanism.
Ministers and the European Parliament are at odds on the authority’s structure and on how to ensure that its common backstop fund will be sufficient in times of crisis. It is set to be financed by a bank levy that would raise 55 billion euros ($75 billion) by 2026, but there’s no agreement yet on what funds could be used if more were needed.
“The easy answer on the question ‘will there be enough money?’ can be to allow … the fund to borrow from markets,” said Dutch Finance Minister Jeroen Dijsselbloem. Allowing for a borrowing capacity would require government guarantees, he added.
But Germany’s Schaeuble rejected that idea, insisting the banks alone must be on the hook. “We have to make clear that the final bill is taken by the (financial) industry.”
Time is tight, however. European lawmakers need to pass legislation creating the bank rescue body before the Parliament’s term expires in May, or the project will be delayed until 2015.
The body would accompany a new centralized banking oversight that is part of the bloc’s planned wider banking union, the eurozone’s main effort to stabilize its financial system.
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