Two euro-area finance ministers renewed calls for the 17 countries that use the common currency to pursue a financial-transaction tax, since such a levy seems unworkable for the European Union as a whole.
“Austria favors the transaction tax,” said Finance Minister Maria Fekter, speaking to reporters before a meeting of the 27 EU finance chiefs in Brussels today. “I’m in favor of introducing it at least in the euro zone because that way we’re also sending a signal to the markets.”
France and Germany have led a push for global implementation of a financial-transaction tax that would extract revenue from banks and other firms in the industry, and the European Commission has proposed a plan that it says would raise 57 billion euros ($79 billion) per year. The U.K., home to most of the EU’s financial transactions, opposes such a tax unless it is imposed worldwide.
Belgian Finance Minister Didier Reynders said officials should press ahead with a transaction tax involving as many countries as workable. “We need this morning to make progress on the taxation of financial transactions,” Reynders said before today’s meeting. “If it’s possible in the European Union it will be a good evolution. If it’s not, we will maybe do the same in the euro zone only.”
Reynders and his Spanish colleague, Elena Salgado, issued a similar call in September.
Separating the euro nations from other EU member states is not a good policy approach, European Commission President Jose Barroso said last night in a speech in Brussels.
“Having two different entities, euro area on one side and European Union on the other, is I believe to a large extent absurd,” Barroso said in response to a question about relations between the U.K. and the rest of the EU that didn’t specifically address a transaction tax. “I think it’s a complete mistake to put the euro area against the others or the others against the euro area.”
Swedish Finance Minister Anders Borg said today that a proposed European financial transaction tax would damage the economy and distract from more urgent matters. Like the U.K., Sweden doesn’t use the single currency.
“Europe is running dry on credibility and the solutions that are going to be discussed here today,” for example the financial transaction tax, “is I think is a non-starter,” Borg said. “It is a very efficient way of reducing European growth. It will increase the borrowing costs for indebted countries, so that is a very inefficient tool.”
European finance ministers yesterday pledged to roll out a bulked-up rescue fund next month, leaving Greece and Italy on the front lines until then in the fight against the debt crisis. Discussions continued today, along with talks on the EU’s financial tax plan and efforts to recapitalize banks.
French President Nicolas Sarkozy said at a summit in Cannes, France, last week that Group of 20 nations had made progress on a future financial-transaction tax that might be used to finance poverty reduction and help the environment.
“The principle of a tax moved forward to the point that we can discuss how its receipts will be used,” Sarkozy said. “France will fight for this tax to become a reality. We will not wait for the rest of the world to implement it to start doing it.”
U.S. President Barack Obama stopped short of endorsing a tax, instead reiterating that big banks should in some way pay for the costs of cleaning up the financial crisis. Administration officials said in Cannes that the U.S. favors levying a fee on big banks linked to the risks they take, and Obama has proposed a “financial crisis responsibility fee” to pay for crisis cleanup costs.
Sarkozy said the U.S. position doesn’t go far enough. “I welcome Obama’s openness to a contribution by the financial sector, but he is not in favor of a tax,” the French president said.
EU Tax Commissioner Algirdas Semeta was scheduled to present the tax proposal at today’s meeting in Brussels. The EU proposal would not tax consumers directly, nor would it prevent institutions from passing costs of the tax on to their customers. The Obama administration says its crisis fee would not affect retail consumers.