Merkel SPD Rivals Vow Transaction Tax Push in a Grand Coalition
Delayed plans for a financial transaction tax in 11 European states would get a fresh push if Chancellor Angela Merkel enters a coalition with the Social Democrats after Sept. 22 German elections, top SPD members said.
The SPD will make the tax -- known as FTT -- a “high priority” if a so-called grand coalition emerges, with the intention of breaking a deadlock caused by squabbling over its scope, said Joachim Poss, the party’s parliamentary finance spokesman, in a Sept. 13 telephone interview. “It’s a project of central importance.”
The EU Commission, architects of the levy, say it may generate as much as 35 billion euros ($47 billion) annually. Implementing the tax was delayed six months to mid-2014 after its European Union proponents failed to agree on which products to exclude from dues and due to legal concerns. EU legal experts have said that applying tax to trades made outside non-participating states may be illegal.
Chances of a “far-reaching and damaging” FTT being introduced are higher in a grand coalition, a prospect that’s “insufficiently appreciated” by credit markets, Citigroup analysts led by Alessandro Tentori wrote in a Sept. 13 note. The SPD also champions a euro region debt redemption fund, a proposition Merkel rejects.
Some 50 percent of German voters prefer a coalition of Merkel’s Christian Democratic bloc with the SPD compared with 46 percent who reject it or are indifferent, showed a FGW poll for ZDF television released on the same day. Merkel has governed in an alliance with the pro-business Free Democrats since 2009 and says she wants to continue such a coalition after elections. She headed a grand coalition with the SPD from 2005 to 2009.
While Merkel’s bloc leads the SPD by 11-15 percentage points, she needs a coalition partner to govern, and the FDP is polling right at the 5 percent threshold needed to win seats.
Merkel last year joined 10 other EU states in a plan to curb speculation in financial markets with a 0.1 percent levy on share and bond trades and 0.01 percent due on derivatives. Implementation is pledged in her party’s election manifesto.
“The CDU wants the financial transaction tax and the SPD wants it”, SPD lawmaker Johannes Kahrs said in an interview on Sept. 13, indicating that a grand coalition would move the project forward. “So far, it has been the FDP which stood in the way”, he said. Amid criticism from banks and insurers, including Deutsche Bank AG and Allianz SE, the coalition government’s push for a financial transaction tax has been tepid, SPD lawmakers say.
Merkel said in a June 14 interview that the German government is listening to investor complaints about the proposed financial transactions tax and will take their views into account when designing the levy at a European level.
“Delaying tactics” employed by Merkel on the tax are a “scandal,” SPD chancellor candidate Peer Steinbrueck said in an Aug. 15 interview in the Sueddeutsche Zeitung newspaper. The SPD wants to channel revenue from the tax into what it dubs a new Marshall Plan to prime Europe’s sluggish economy, Steinbrueck told voters at a town hall meeting last week. The plan has “apparently been put on ice” by EU negotiators, he said.
Even if the assumptions of the EU Council’s legal service are correct “it’s no death knell” for the tax, Finance Minister Wolfgang Schaeuble told reporters in Vilnius, Lithuania, on Sept. 13. “A solution can be found for that.”
“The German finance minister -- that’s me -- has always said it won’t go that fast,” Schaeuble said. “If you look at the budget draft for 2014 there’s not a cent there from the FTT -- we’re working seriously and cautiously.”
In a grand coalition, the SPD would champion all of the commission’s proposals, including taxation of pension fund investments, Carsten Sieling, a SPD lawmaker and finance spokesman, said in a Sept. 13 telephone interview. “We’d keep pension transactions in the pool of taxable trades -- that pensions will suffer is exaggerated.”
The 11 nations planning to apply a common FTT are: Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia, according to the commission’s website. The U.K, Denmark and Luxemburg and Sweden reject the plan.
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