German Chancellor Angela Merkel’s potential coalition partners, the Social Democrats, want to make implementation of a proposed financial-transaction tax a requirement for participation in a European banking union.
Germany is one of 11 euro-area countries that support the tax plan, which the European Commission estimates could generate as much as 35 billion euros ($48 billion) annually in its current form. Only participating states will have a vote on the proposal. In January, the U.K. filed a legal challenge to the EU’s decision that allowed the 11 states to proceed.
“This tax should be made a condition for joining the banking union,” Carsten Schneider, budget spokesman for the Social Democrats, or SPD, said today in a written reply to questions. “For the SPD, it’s important that taxpayers in the future are no longer liable for banks.”
The 28 EU states have set a year-end deadline to reach a common position on a proposal by Michel Barnier, the bloc’s financial-services chief, for a Single Resolution Mechanism that would centralize the handling of euro-area banks in financial trouble and have a common fund financed by a levy on the banking industry.
Germany has led the attack on Barnier’s plan, challenging its legal basis and warning it could weaken governments’ control over their budgets.
The SPD will push for using financial-transaction tax revenue to fill the Single Resolution Fund when the party begins coalition talks with Merkel’s Christian Democrats on Oct. 23, Schneider said.
Under Barnier’s plan, a designated bank levy would take 10 years to fill the fund. While transaction-tax revenue would replace Barnier’s levy during the topping-up process, once the fund is full, the planned levy would kick in, Schneider said.
The SPD rejects Merkel’s preference for having a network of national regulators handle bank resolution. Last month, the party’s finance spokesman, Carsten Sieling, proposed putting the European Central Bank in charge of failing lenders in addition to the ECB’s oversight of banks, which is scheduled to begin in November 2014.