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Galan Says Tax Raids on Power Industry Risk EU Economic Recovery

Oct. 24 (Bloomberg) -- Iberdrola SA Chairman Ignacio Galan said European politicians are undermining the energy industry’s ability to drive an economic recovery by increasing taxes on power companies.

“The high degree of political intervention of the last few years and the increasing pressure on tax revenues” has created “a climate of heightened uncertainty,” Galan said at a conference in Barcelona today. “That reduces the revenues and market capitalization of energy companies.”

European leaders are scrambling for funds as they face the cost of bailing out Portugal, Ireland and Greece while also restraining their own budget deficits. Germany and Italy have raised taxes on energy companies this year, and Finland plans a windfall tax on nuclear plants. France and Spain face elections that may lead to extra levies on the industry.

Europe needs “a regulatory and legal framework that is stable and predictable” in order to “support reasonable expectations of profit to encourage investment,” Galan said. “Our industry has the capacity to reinvigorate the economy and become a significant engine of growth.”

The EU power industry employs 750,000 people, invests 50 billion euros ($69 billion) a year and accounts for 5 percent of the bloc’s economic output, Galan said.

European leaders yesterday completed their 13th crisis meeting in less than two years without agreeing on a plan to box off the market turmoil. Moody’s Investors Service on Oct. 17 said France’s AAA credit rating is at risk because of the strain of the bailout program.

Spain added 1.3 billion euros of costs for power companies in December when it reworked its electricity system to try and rein in the deficits it has accumulated. The new government may impose a tax on nuclear and hydro plants to close the gap, Europa Press reported Oct. 16.

Francois Hollande, the French Socialist candidate who starts as favorite in next year’s presidential election, has pledged to reform corporate taxes and said he plans to scale back the use of nuclear power.

To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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